Are Banks Right to Turn Down Overdraft Requests?

Just before the New Year, my local newspaper published a letter from a woman who had been waiting in a queue at a Tiverton bank and who had overheard a conversation that a polite, elderly gentleman was having with one of the cashiers.

He was asking for a £10 overdraft because he had no heating at home and needed to top up his “heating key”. Unfortunately he was short of money because he had just paid his newspaper bill, which had been more than he had expected. He was obviously known to the bank and had an account there but the cashier explained to him that there was nothing that she could do. In reply, the elderly customer kept on saying that he would have no heating over Christmas and that he would pay back the £10 after the Christmas break because he was expecting to receive a cheque. He also asked to speak to somebody he knew at the branch, but was told that she wouldn’t be able to help him either.

The woman who related this story expressed her embarrassment at witnessing this situation and explained that, as the pensioner thanked the cashier and started to walk away, she had felt moved to leave her place in the queue to press a £20 note into his hand.

On the face of it, it looks as though this story could have come straight from the pen of a modern-day Charles Dickens, with the miserly attitude of the bank and its employee making them the villains of the piece. But once I started thinking about it, I got the feeling that the bank cashier probably did the elderly customer a favour.

Unplanned overdrafts, such as the one that the customer was asking for, invariably incur substantial bank charges. For simply going overdrawn by £10, the pensioner could have been charged a monthly fee of about £15, together with a daily fee of about £5 for every day his account remained overdrawn. So, if he had waited for his cheque to arrive at the end of the Christmas (and New Year) break, and taking into account the time it would have taken for the cheque to clear, his initial £10 overdraft could have become £100.

Can you imagine how upset the woman, his Good Samaritan, would have been had she realized that. Then the letter to the press could have been complaining about how he had been overcharged! Which letter would you have preferred to read? I know what my answer would be!

Are We Responsible for the Crisis in the Retail Sector?

With the demise of Woolworths still fresh in our memory, perhaps we ought to take note of a an open letter to customers that was written by a member of staff in Edinburgh and distributed throughout the rest of the Woolworths branches in the United Kingdom just before Christmas. It read as follows:

Dear Customers,

While writing your 30-per-cent-off cards with your 30-per-cent-off pens, and wrapping your 20-per-cent-off toys and 50-per-cent-off gifts in your 30-per-cent-off wrapping paper, surrounded by your 30-per-cent-off tree and decorations, eating your 10-per-cent-off chocolates, listening to your 10-per-cent-off CD, while your children play with their 10-per-cent-off  console games, wearing their 30-per-cent-off clothes, with your table laid with your 20-per-cent-off dishes and cutlery and later tucking up in your 20-per-cent-off bedding, reading the latest 20-per-cent-off novel, spare a thought for the Woolworths staff who have given 100 per cent to the very end.

When we do buy heavily discounted goods from shops such as  Woolworths, Zavvi, Marks & Spencer and so on, we tend to forget that these discounts are cutting into the retailer’s profit margin, which affects their ability to pay the rent and rates, their staff and their suppliers of not just the goods they sell but also of lighting and heating. If such discounting leads to a discounting war between rival retailers there are sure to be casualties, with the less-profitable stores going to the wall and customers losing a certain freedom of choice of where to shop. Several major retail chains in the United Kingdom are rumoured to be on the brink of going into administration or even liquidation – the actual number changes from day to day but it is believed to be about twenty. And all because customers have an insatiable desire to buy goods at the cheapest possible price! We will only have ourselves to blame if  our high streets and “shopping centres” become ghost towns and we are forced to buy everything online via the Internet. Do we really want to buy everything from Amazon!

Meanwhile, it is reported that Iceland are hoping to acquire about fifty Woolworths stores. Let’s hope they run their frozen-food business better than they run their banks!