Tan Kin Lian's Blog: Hefty bank charges

Tuesday, March 02, 2010

Hefty bank charges

Vincent Chan wrote to the Straits Times to complain about a hefty charge of $12 to pay for a budget air ticket of $50, using his credit card. I paid a bank charge of $75 to transfer $2,500 to a factory in China. My bank told me that if I pay late on my credit card, there is a fee of $50 in addition to the interest of 2% per month on the rollover.

It seems that the banks have gone overboard in levying exorbitant charges for essential banking services. The authority (MAS) sits on the side and allow them to charge what they like. The banks are able to make billions of dollars of profits from the interest spread and hefty charges. Are bank customers being fleeced?

Tan Kin Lian

25 comments:

Anonymous said...: I used my credit card to pay for fees due to booking of air-tickets on Malaysia Airlines (MAS) website.
The cost during booking and later statement of account were different. I asked the bank and MAS. Each denied their responsibility. After sending emails to and fro for more than a month, the bank finally found that there was a transaction fee imposed for such a booking. I wrote further to complain, finally got a waiver though the amount is just less than $10.
I think this is incorrect since I am not informed beforehand.; March 02, 2010 7:35 AM
Anonymous said...: Maybe we have to use cash to avoid all these charges.; March 02, 2010 7:40 AM
Tan Kin Lian said...: It is a common practice for a bank to levy high charge. When you complain, they waive it. If you do not complain, the keep the profit.

This is almost like stealing. Why should our business resort to such low ethics and shady practices, to boost their profits?; March 02, 2010 7:44 AM
Anonymous said...: Mr Tan,
Did you read today's Forum about a supermarket selling a free item:
Is supermarket charging for free item?
http://www.straitstimes.com/STForum/OnlineStory/STIStory_496473.html
If this is true, is this correct?
I think there is only a fine line left between right and wrong.; March 02, 2010 8:05 AM
Ali M said...: Maybe the Govt can fined the Bank heftily if they continue to practice this unethical way of making a profit. An example will be like an Off-peak car owner driving his car and not putting up a $20 coupon. The Govt imposed a fined so large that it will make the owner think a million times before he does it again.In this case the Govt can imposed a fine of between $10,000 to $30,000 ON THE ERRANT bANK.
This will boost business as people will be assured that the Govt is protecting the interest of the masses.; March 02, 2010 9:27 AM
Anonymous said...: I have recently encountered a bank requesting processing fee of $800 for converting my loan with them. This ridiculous gigh charges are later reduced to $500 after complaining. I wrote to MAS and they simply replied "it's a commercial decision" ! So what is the role of MAS in S'pore then? Thought they are suppose to protect the interest of Singaporeans ???; March 02, 2010 9:34 AM
Anonymous said...: The source of the issue is this: at the end of the day, is it more important to the govt that banks or individual ple or biz remain financially viable? Clearly, it is the banks as banks form the backbone of the entire economy.

In football analogy, if a soccer team's goalkeeper is red-carded, a replacement goalkeeper will be brought on at the expense of an outfield player. Banks are that goalkeeper, everyone else is of secondary importance. Of course, no govt bodies/leaders will admit this as it is politically suicide to do so.

Putting banks' interests first is clearly demonstrated by how the govt handled the minibond saga and deposit guarantee. From ple in the know in the financial industry, the Finance Minister was adamant against extending govt guarantees on deposits with banks. However, when HK announced their intention to do so, funds started to flow out of Spore (to HK) and the very next day, the Spore govt announced they want to guarantee deposits. Less said abt their 'caveat emptor' approach towards the mini-bond saga. These 2 examples justify my point that our Spore govt puts the interests of banks far ahead of Singaporeans.; March 02, 2010 10:22 AM
Anonymous said...: To the bank these charges are "fair value".

There are many "fair values" of things in this world, depending on who you ask and how powerful (unchallenged) they are.; March 02, 2010 10:24 AM
Xtrocious said...: On the post about Supermarket's selling the free items, I often find that it is the case when some products are supposedly bundled with "freebies", their prices are correspondingly marked up as well...

In essence, the freebies are not free...; March 02, 2010 10:57 AM
Anonymous said...: Since when is MAS main role to protect ordinary citizen against unreasonable actions of financial institutions? I quote directly from MAS website: "Our mission is to promote sustained non-inflationary economic growth, and a sound and progressive financial centre."

MAS mission is to ensure continued GDP growth, and to make sure that banks and other FIs remain strong and sound, in order to develop SG as a global financial centre able to attract foreign investments and banks.

Nothing about protecting the ordinary masses against asymmetric commercial powers of banks and other FIs.

You get what you voted for.; March 02, 2010 11:00 AM
Anonymous said...: Our banks are very strange, they do not believe in retaining their loyal customers. they will charge you fees for credit cards renewals but will give free cards to new customers. for fixed deposits its the same they will give better rates to new funds but for renewals they will give you the published rates. i have no idea why they don't value your business. so we must change bank all the time, its very troublesome.; March 02, 2010 11:02 AM
Anonymous said...: Dear Mr Tan
I contend (unless someone else can convince me otherwise) that the bank is merely improving its productivity by charging hefty fees.

This is consistent with Singapore's recent drive to increase productivity.

What I can't figure out is how exactly does this improved banking productivity translate into a better life for the heartlanders.

Yes, the bank enjoys better profits. Again, how does the bank's bigger profits "trickle down" into a better life for HDB heartlanders?

This is the issue I have with solving problems on a 'MACRO" scale.; March 02, 2010 11:13 AM
Parka said...: To Anonymous 11:13pm,

That's not productivity, which is about doing work more efficiently and effectively. That's just increasing cost for customers.; March 02, 2010 12:23 PM
Parka said...: Speaking of bank charges, recently I cashed in an European check (Deutsche bank) with DBS.

Here's the breakdown of the check processing charges:
DBS admin charges: US$5
DBS postage charges: US$5
Deutsche Bank admin charges: Euro 50

Yes, read that right. Deutsche Bank has the audacity to charge Euro 50 to processing one of their cheques.

There just can't be any justifiable explanation for this ridiculous high cheque processing fee.

This is why people hate banks so much. Because they are not providing value for simple services like this. They are just giving the common people every chance to hate them.

I think in every country, there should just be a bank that handles just one function, which is the depositing and withdrawing of cash, nothing else, no investment branch or whatever. This is the type of bank that will give commercial banks competition.

Right now, consumers just don't have the negotiating power because banks just gang up together.

And the part about not stating charges upfront should be made illegal and punishable by law. That's no different from stealing.; March 02, 2010 12:35 PM
Anonymous said...: People still don't get it.

Higher GDP --> does NOT automatically translate to better life for masses.

Higher productivity --> does NOT automatically translate to better life for masses.

Higher GDP & productivity directly benefits only business owners, large corporations, big shareholders and PAP (due to bigger tax revenue and salary increase pegged to GDP).

It will only meaningfully benefit the masses only with careful system of equitable social regulations and laws. Furthermore, the growth of population size must also be lower than growth of GDP or productivity, otherwise the size of the pie will still grow smaller than the size of the hungry mouths.; March 02, 2010 1:10 PM
Anonymous said...: MAS's role is not to protect investors and bank clients. It is
to protect these FIs, who form the
backbone of the economy, so that they remain in Singapore to contribute to the GDP growth. People should remember this in their hearts. Singapore has to remain a financial centre, as it is
a service economy, very soon the
manufacturing industries have to be phased out. Our young graduates
instinctively (esp the engineering
and science students) enter the
financial sector upon graduation,
they don't enter their chosen field. My son who took up post-
graduate studies in Engineering in
NTU found out to his astonishment, he was the only Singaporaen in his
class of twenty students. The rest
came from rest of Asia, some on Singapore Govt scholarships, while
he has to pay out of his pocket.
Fortunately he was regarded by the
German Govt as a talent, and partly
paid for his fees.
So folks, don't ever hope for this Govt to protect your interest.
Sometimes a foreign Govt may offer
aid, just like our Govt handling
out scholarships to other Asians to
study here.
So grit your teeth, and bear with
the protected banks and other FIs
here.
As for my son, he is making preparation to migrate and work
abroad where he is appreciated more
in his chosen career in IT and
Electrical Engineering. It is sort
of a brain drain in reverse.; March 02, 2010 1:45 PM
Anonymous said...: I think in this age of the internet, we as consumers can contribute to each other and wield our power. If you have experienced being levied unfair charges and have succesfully complained against it, please post it online to educate other. For example, after reading post 9.34am we know that we can reduce loan conversion fee from $800 to $500. I for one would like to know more about experience like this and how to save money.; March 02, 2010 1:47 PM
Anonymous said...: "Facilitation charges" according to one budget airline.
Anything within the law to make another buck from you.
How is it within the law?.. it is clearly said that the charge is levied.. and by clicking "yes" or agreeing to pay the final amount, you have tacitly agreed to the terms.

No lawyer can defend you.

This is a commercial decision!
You agreed to it... despite the existence of the unfair practices under the consumer act.

All are sheep. we just follow.. they just eat.; March 02, 2010 2:25 PM
A Singaporean said...: I once tried to transfer a few thousand dollars from one account of bank X to another account of bank Y. Initially I asked for a direct bank to bank transfer. Bank X wanted a transaction fee, I don't remember how much, but not very small. Next, I asked for a cheque. It too wanted a slightly smaller fee. I feel very angry. In the end, I first withdrew that few thousand dollars from bank X in cash, walked across to the ATM of bank Y that was located diagonally opposite bank X, and cashed in that money. Then some days later, I withdrew most of my money from bank X in cash over a few transactions as a protest. But I guess the higher ups of bank X won't notice it at all.; March 02, 2010 5:20 PM
Anonymous said...: Regarding PARKA 12.23pm comment:
"That's not productivity, which is about doing work more efficiently and effectively. That's just increasing cost for customers."

Respectfully, you are wrong.

The bank is being productive (making more money from the same work inputs). If that is not effective and efficient, I don't know what is.

It's just too bad that the bank's productivity comes at the expense of increasing customer's cost.

The customer's increased cost is the bank's increased profit.

Similarly, Singapore's economy can be made more productive by reducing costs (reduce staffing levels for social services and subsidies for medical expenses).

Of course, the salaries of scholars and other sacred cows cannot be touched.

We save the pennies, but not the pounds. Penny wise, pound foolish.

Productivity drive. Always ask "How exactly does this benefit me?"; March 02, 2010 6:18 PM
Puzzled said...: this is interesting.

could you show how you arrive at "banks are able to make billions of dollars of profits from the interest spread and hefty charges"

thanks.; March 02, 2010 7:50 PM
Angry! said...: I agree with "anonymous 1:10pm"
that business benefit from productivity and the PAP benefit from the GDP.

The cabinet minister's pay is pegged to GDP growth.. and with better productivity for businesses, GDP will also increase.
The net result is marginal benefit for the larger populace but huge gains for the Gov and business.

We have all been short changed.; March 02, 2010 8:26 PM
Parka said...: Oh. Here's a tip to get annoying financial advisors off your back, especially when they are peddling their products.

Ask them to pay for your time.

Simple as that.; March 03, 2010 2:30 AM
Anonymous said...: It brings to mind, how much do the FI contribute to the Economy? Do transferring money from 1 pocket to another means productive?
Just look at the situation of no one work but only banks in an economy, an all the citizens of the economy just make a transfer and have to pay a bank charge, the GDP will be THAT bank but what have the economy gain as a whole?
Nobody's life is made better! No one in the economy gain (although the bank make a fee, the whole economy is not producing anything extra).; March 03, 2010 5:13 AM
-OTB- said...: Just one small story,

I have been using my POSB ATM card many years and the card is de-laminating due to wear and tear (still using now).

I have problems using the ATM card over the cashier on NETS service especially because the reader just wouldn't read it.

One day, I walked to a POSB branch and talked to a customer service officer. Asking if POSB could issue me a new card after all it has been so many years of usage.

The officer told me it is not possible and I need to pay for $25 (or around this figure) to get a replacement card.

I was very disappointed and told her that I have been her bank's customer for so many years. I also pointed out that new customer get free ATM card while old customer suffers.

I reminded her that I can get a new ATM card for free by opening a new account.

But she retorted that I have to suffer many inconveniences if I have to transfer my GIRO arrangement, salary credit, bill arrangement, etc to the new account.

I was shocked that she made this threatening remarks. I thought she looked visibly embarrassed by her words.

I walked off sadly. What can I do ? I used more adhesive tape to fix my card and take more cash along for shopping.

-OTB-; March 05, 2010 9:38 AM

Tuesday, March 02, 2010

Hefty bank charges

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