Monday, December 06, 2010

On money-related irony

Just lately, I have been thinking about some of the ironies inherent in our financial systems.

When we lived in South Africa, bank charges were very high. You paid a cash-handling fee when you deposited large sums of cash. You paid an admin fee every time the bank processed a cheque of yours... or one from someone else that was made out to you. You paid for a new cheque book when the old one was empty. Basically, you paid for everything. Walk into the bank and breathe, and they charged you for the air. This is something that people in the UK simply can't relate to. Here, many bank transactions are still free. But we'll come to that in a minute. Back to South Africa for a moment (sorry, are you getting whiplash?).

If you agreed never to drop below a certain balance, your banking became free. And the balance was not just a few Rands, either. So, basically, if you were flush enough not to need every last cent you had, you could have all your bank services free of charge. If, however, you were balancing on a knife edge, and needed every cent you earned, you had to pay to access this money. And it's no small matter, either - total bank charges could be among your larger expenses.

It gets worse. Let me relate an anecdote that I witnessed on more than one occasion. Person X, let's call him Thando Sijawe, came into the bank to draw some money. He couldn't use the hole-in-the-wall, because, like many South Africans, he was illiterate. He explained to the cashier that he wanted R10, and she wrote out the withdrawal slip for him, which he then endorsed with his thumbprint. She gave him his R10 and he went on his way. What he didn't know was that the bank charged him R7 (I kid you not, that was the exact figure) for this service. If he had drawn out all his money at once, this might have been less significant but crime levels were (are?) high in South Africa, especially in the poorer areas where Thando lived, so the tendency was only ever to carry money enough for your immediate needs, taxis, buses and the day's food supplies. People like Thando had to deal in cash, because their illiteracy meant that they couldn't use the pay-by-card option.

So, not only did Thando get penalised for being poor, he suffered the double whammy of being further penalised for being uneducated, too.

But it's not just Thando. And it's not just in South Africa.

In the UK, much of our banking is free. The flip side is that it is also slower. Everything takes longer. And you can do so much less at the hole-in-the-wall. But you learn to live with that. However, if you're having a bad month and one of your standing orders bounces, there is a fee of £22 that is levied. So basically, they're fining you for being broke.

As I have already (very publicly) stated, my business is being declared bankrupt. This morning, I was advised that I need to pay £2500 for this process. It seems I am too broke to go bankrupt. Go figure.

I'm not sure what happens next. I am going to see an insolvency adviser to discuss my options.

I apologise if this transparency makes you feel uncomfortable. I just hope that it will prove helpful to others who may be having a tough time of things, right now.

I also think it's important to shine a spotlight on some of the things that strike me as being out of balance in society. After all, the fat cats of the banking industry are the ones taking home the huge bonuses.

Everyone knows my understanding of accounting is negligible, but I can't help feeling the wrong people are paying for those bonuses.

3 comments:

Nicola said...

Well said! I've had a look around but can't find anything useful so far, other than
http://www.piggybankrupt.co.uk/
http://www.insolvency.gov.uk/

V Yonkers said...

If you think that's bad, in the US you may actually OWE banks money for not withdrawing and/or having a minimum amount in the bank. Check out this article from my local newspaper. Not only that, but in the US, you must get paid by check or direct deposit, but you can't cash a check unless you have a bank account. This means that people who work in bits and starts have trouble cashing their pay checks and have to pay hefty fees when they do.

Karyn Romeis said...

@Virginia That's not unlike South Africa. One teacher at my son's nursery school decided to teach the kids about banking and saving and all that malarkey. So she asked each parent to send along R10. Then, by special arrangement with the local bank, she took the kids in and they opened accounts for each of them. She told them how the lady was going to look after their money for them in her big drawer and how it would grow in there.

However, the first statements showed every child to be overdrawn because the cost of opening the account was more than R10. So much for interest on savings!

We also had stories similar to the one you linked to, in that the savings accounts my mother in law set up for each child were subject to penalties because they weren't making any withdrawals. Obviously, the word 'savings' was a misnomer.

It makes it so hard to teach your kids to save, when it costs them to do so. Sometimes, I think Granny's idea of the money under the mattress should come back into vogue!

Cheques in the UK cannot be made out to 'cash'. You have to make a cheque out to a person or an organisation, and it has to be crossed. So here, too, you have to have a bank account if someone pays you by cheque.