Why don’t we all move our bank accounts more often?
WHY don’t we all move our bank accounts more often? It’s one of these very strange things about the British economy. We’ve a number of national banks. It’s easy enough to move one’s bank account yet very few of us do so. But we all also complain interminably about how the bastard banks rip us off.
Which is odd, most odd. For if we did all become more likely to move our accounts then the banks would pretty soon start to deal with us rather better: for they make most of their profits out of us.
This gets slightly geeky I’m afraid: but it is true that one of the biggest contributors to banking profits are our current accounts. Yes, I know, your account at the end of the month has 3p in it just like mine does. But the average amount a current account holds is 50% of your paycheque over a month. The average paycheque is £1,500 or so (median wage of £24k a year minus taxes, very rough estimate) meaning the average current account has, as its average contents, £750. Just on these very rough calculations indeed that’s £40 billion that the banks get to borrow for no interest and lend out at lots of interest. For that’s what they do of course, they don’t just keep our money in the safe, they lend it out.
As it happens my little calculation there is way out. This money that we lend to the banks interest free is called “the float”. And one estimate of the profits that the banks make on the float is £20 billion a year. Yes, that’s profits. And of course they can only make these if we’re prepared to put up with whatever service they decide they want to give us. If we were all a bit more obstreperous about this then there would be competition for our money and the services we get would rise as the money we have to pay for them fell.
And this getting sarky with the banks would indeed mean our being willing to move accounts. As I say at the top the country does have a number of banks and it’s not all that difficult to move accounts. But, as turns out to be true, we move our accounts less often than we move houses on average.
Which is, really, why we get pretty shitty treatment from our banks. Because we just don’t seem to be willing to make them compete for our custom.
Photo: The figure of Ariel on the top of the New Bank of England, as seen through the long-focus camera in London on March 7, 1937. The statue is the work of Chas Wheeler. Date: 07/03/1937