Bank Charges

Nobody likes to pay money out if they can help it. It’s often against our nature and if you don’t feel you’re getting any value for the money you have spent, you will obviously feel aggrieved.

Bank Fees are a particularly challenging subject with banks having to be ‘bailed out’ by the tax payer and both real and perceived drops in service leaving people feeling they aren’t getting any value. Allied to the fact that the market had got so competitive most bank managers just waived all the fees as the easiest way to save themselves getting a hard time from a customer, it’s a sore subject now that fees are increasing for ordinary business bank accounts.

I often get asked by smaller business owners about who they should bank with to get free banking. There are lots of options out there, although most have a time limit to the offer before normal fees kick in. For a brand new start up business, any saving is important and you can’t knock the banks for still offering something to these businesses. However, let’s be under no illusion, banks are commercial businesses that look to make as much profit as they can – just like any other commercial business. Running an ordinary bank account with no lending facilities or credit balances to earn money off isn’t going to make them any profit, so they both need and want to charge for these.

Are we talking a lot of cash when we talk about these bank fees for having a bank account? Often not in the great scheme of things. If you work out the impact to your gross margin of paying in a cheque, it would be of concern if it causes a major issue. If you have customers who pay in electronically, it’s an even smaller cost. Then consider the £5-6 per month fee most banks seem to now charge, we’re talking £60-72 per year. Sure, it would be great not to have to pay out anything, but is moving your banking around really worth the effort?

Before you embark on an exercise to review your bank charges and move banks, always think about the relationship you have first. If you have a strong bank relationship, I would suggest it’s worth a lot of money. Your bank manager will have lots of connections and contacts who could prove useful and access to a huge amount of information that you may find invaluable for your business.

You should also consider the cost of your time and that of your staff who may have to be involved in the exercise and ultimately moving the banking. Conservatively it will take a few days over a period of time to get everything sorted out properly with the bank itself and with the people who will inevitably pay into the wrong bank account, as well as having stationary to change and putting in and learning new systems that will usually be required. If your total banking charge per year is £500-£1,000, the potentially saving could very quickly be used up through the cost of your time looking at it. So does it make commercial sense to spend hours stressing over your bank charges and then moving banks?

Finally, what are your future plans? If they involve bank facilities for lending or international trade for example, you should be looking at your bank to be stakeholder in your business who will partner with you to provide funds, expertise and understanding. If you move to a new bank you are always starting from scratch and if you then ask them for some borrowing that you have never had before, it will be a greater challenge than it would have been with your previous bank.

So put fees into context. Think commercially about whether it’s worth moving for the effort required. If things really are so bad to justify it, then you should do it but for the right reasons, not just because of a £60 per year fee. Always think about what your future plans are and how you get on with your manager. That said, if it isn’t right you should also remember that a bank is only another supplier to your business and if a supplier isn’t performing, you find a new one!


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