Some time back, we invited Think Banking to share their rationale for offering a current account at £14.50 a month. We are therefore delighted that Ian Williams - @IWill41 - has agreed to explain it to us.
Last month The Fair Banking Foundation recognised a number of products, including thinkbanking’s current account, with a 3 star accreditation mark, on the basis that the products helped customers manage their money better.
Since then a number of commentators, including Zero-credit, have asked the question “why would you want to pay for a current account when you can get free current accounts and basic bank accounts on the high street?”
Well we, and more importantly our customers, would point to a number of reasons.
Firstly, thinkbanking is a very different product from most current accounts. It offers a high level of personalised service to customers who want or need help budgeting.
Whilst most of us are happy and able to budget each month to ensure that our bills get paid (and we don’t run out of money mid-month) a significant number of people want or need help with this. This is particularly true for thinkbanking customers many of whom have irregular incomes or are paid weekly or fortnightly and receive benefits fortnightly or four-weekly – which makes budgeting for monthly bills that much harder. The account isn’t just for people in debt, indeed many customers use thinkbanking to help them avoid debt by living within their means.
The budgeting service has a number of benefits for customers. Firstly, they are more likely to pay their bills in full. As well as being important and a good thing in its own right, it also means that they aren’t charged by the bill originators (such as mortgage lenders) for missed payments and nor do they go into arrears (which could impact their credit record).
Customers’ money, over and above what is held for bills, is transferred to their card account for them to spend using their debit card or to withdraw via an ATM. So customers know exactly how much they have available to spend at any time. Customers tell us that they value the peace of mind that this gives them.
So for the fee, customers are getting a service that allows them to do more than just pay in and withdraw their money. They are also getting online and text banking as well as access to our UK call centre. And because our system forecasts the balance in customers’ bills accounts our Money Managers are able to offer a pro-active service, calling customers to alert them if it looks like they may not have enough money to pay a bill.
Most of us believe that we enjoy “free” banking from our current account provider (even if we are actually earning no interest on our money). But not all of us. Customers who either go into an unauthorised overdraft or who have items returned unpaid by their bank are usually charged for doing so. In fact the OFT found(1) 1.4 million people paying more than £500 in overdraft or returned items charges in a year. Worryingly 57% of these people had also paid bank charges in the previous year.
These charges don’t just hit those with mainstream current accounts. Basic bank accounts may not offer overdrafts but they still charge for returned items – typically between £8 and £25 per item.
The OFT found that the people who pay these bank charges are often those that can least afford to do so. Many consumers also find bank charges bewildering. By contrast thinkbanking’s monthly fee is clear and transparent.
So what does this mean overall? Well, although it may seem counter-intuitive, paying a simple, transparent, £14.50 a month for a current account saves many of our customers money if they were previously incurring charges through poor money management. And our budgeting service gives them peace of mind that they tell us they place a high value on.
(1) Source OFT March 2010 – Personal Current Accounts in the UK unarranged overdrafts.