Commentary: Morality and bank charges

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A confidential survey by one of the biggest clearers shows that the majority of customers regard charges when they are overdrawn as a form of punishment. Those who are in credit are not thought to deserve being charged - in other words chastised - because they are seen to be behaving virtuously.

Such attitudes to debt surely go back to well before Christ. They were of course encouraged by the banks' own decisions to offer free banking for customers in credit in the mid-1980s.

But the survey shows that raising charges and especially a move to introduce them for customers in credit is made harder by two other entrenched beliefs: most customers think wrongly that the banks' income from lending and investing their deposits more than pays for running a banking service, so a free current account is seen as the norm.

Furthermore, the vast majority do not acknowledge that the cost of banking services is increasing and do not appreciate that banks invest money in infrastructure - such as computer systems - to provide the service.

Customers conclude from this that higher charges are a result not of rising costs but of bad decisions elsewhere in the bank, namely all those disastrous loans to property companies.

There is some truth in that attitude, because the banks must make money from profitable businesses to pay for the losses. But in practice customers' attitudes undermine what is fundamentally a perfectly sensible move by the banks away from cross-subsidisation between segments of the business. There is no reason why retail customers in debt should pay interest rates and fees that are well over the costs of the service in order to subsidise money transmission and other facilities for similar customers who stay in credit.

The banks' hardest problem in winning the battle for the hearts, minds and wallets of customers is that the survey shows that all these attitudes are consistent and rational, even if based - from the banks' point of view - on false premises. Indeed, bank managements are still groping unsuccessfully for new ways of persuading customers that this is about cross-subsidisation not morality.