Banking on a Barclays Personal Reserve?
November 28th, 2008
We regularly hear from Wonga customers with stories about unexpected bank and credit card penalty fees. It’s an issue that’s been widely covered in the media and there are loads of websites now set-up to help consumers reclaim questionable charges from the likes of Barclays.
So this won’t be the first blog to offer views on much maligned overdraft fees, but we’ve recently heard from several people who’ve had a lot to say about Barclays Personal Reserve. So we checked it out for ourselves and had to laugh at this thinly veiled attempt to replace unauthorised overdraft fees with… Personal Reserve fees!
So what is a Personal Reserve? Well you’re welcome to check out the Barclays site for yourself, but we’d suggest it’s a new name for describing a double overdraft. You see Barclays kindly gave their customers a Personal Reserve earlier this year (you have to opt out, much like Gordon Brown’s recent donor card proposals). It’s essentially an additional “buffer” overdraft that sits on top of your existing overdraft facility. It’s also a potential cash cow for Barclays - you’re not supposed to use it regularly of course, but we rather suspect they’d like it if you did.
True, the previous unauthorised overdraft fee of £35 was done away with, but a Personal Reserve fee of £22 is payable every five working days you’re using it, even if you’re just a few quid overspent! Compare that to taking a short-term Wonga loan for five days, which will cost you £10.70 - less than half the cost. And we don’t ‘assume’ you’ll want one either. Worse still, imagine going £100 into your Personal Reserve for five consecutive 5-day periods (the maximum allowed) - you’d be charged £110 for the pleasure!
There’s a distinct possibility that banks will be forced to scrap their huge fees for unauthorised overdrafts, so this was most likely a pre-emptive move by Barclays. That might sound like good news for consumers, but the reality is that banks are unstoppable money making machines and, as tough as recent times have been for them, they will always find new ways to generate revenue.
There’s nothing surprising or wrong about that of course - they are businesses after all - but when it becomes harder to generate cash from consumers, transparency is often the first casualty. And there wasn’t too much of that about in the first place! If overdraft fees do bite the dust at any point soon, you can bet that new, potentially even more stealthy ways will be found to make up for the lost income.
So full marks to Barclays for creativity and proactivity, but bear in mind that at the same time they decided all their customers deserved a Personal Reserve, they scrapped interest paid on positive balances in personal accounts and raised the interest charged on standard overdrafts. It seems a case of ‘giving’ with one hand while taking with the other.
November 28th, 2008 at 3:00 pm
Barclays typical APR isn’t 2334%, like Wonga’s. Enough said.
November 28th, 2008 at 5:01 pm
I have given up trusting banks years ago. I also think that what Barclays are up to is a cynacal attempt to pray on those unaware as to how their charging structure really works. I use Wonga.com and I think that at least I know where I stand when I need some extra money.
November 28th, 2008 at 5:55 pm
To nd1667, we’ve had the APR discussion previously. We still welcome your comments of course and thank you for following the blog. But you presumably think that a large, purely theoretical number is worse than paying £22 for going £2 over your overdraft limit for a day?
Need an emergency £100 from Barclays over a month and they’ll charge you £110 for it, but there’s no APR because it’s a fixed fee. Clever eh? But perhaps you still feel that’s value because there’s no evil APR number attached to it.
We on the other hand don’t force people to pay a fixed fee, nolr do we assume people want our service - it’s here as an option. We don’t charge a fixed fee because we offer something the banks have never got the hang of. It’s called flexibility.
That means our cash advances come with an APR - a largely irrelevant ANNUAL measure that assumes compounding and a minimum 12 month term (neither of which we do). So be it, but we prefer to offer flexibility and let our applicants decide what’s good value. As a result we have a world class Net Promoter Score and 75% of our customers tell us that, given the choice, they prefer using our service over bank loans and credit cards.
November 28th, 2008 at 7:00 pm
I couldn’t agree more Wonga!! Im a Barclays customer and couldn’t quite believe my eyes when this nonsense about personal reserves dropped through my letter box. I obviously told them where to get off coz I dont appreciate decisions being made for me.
November 28th, 2008 at 7:25 pm
The banks will bleed us all dry. I’ll continue to use Wonga whenever I’m in a pinch.
November 28th, 2008 at 7:33 pm
I stumbled upon your myspace blog which pointed me to your site - cool stuff. I’ll def let my friends know… x
December 1st, 2008 at 10:51 am
This is classic Barclays and there are plenty of other stories about this rip-off - http://www.guardian.co.uk/money/2008/may/31/banks.bankcharge. I was a customer for years but finally saw the light when this happened. Mind you, there aren’t a great deal of better choices when it comes to bank charges.
December 9th, 2008 at 12:29 am
The fact is is that the banks charge around 15% to 20% for a short term borrowing facility whilst you charge 2334%. So borrowing £100 for 30 days would cost wonga customers £36, but borrowing on a bank overdraft for a month would cost you something like £2 (£100 x 20% /12). That makes the APR look pretty relevant to me.
True going into the red without agreeing it first will cost more, but if you’re going to go to trouble of arranging a loan with wonga, why not just arrange an overdraft with your bank, as it will be much, much cheaper? Or even better, put it on your credit card, pay it off at the end of the month & have an interest free loan at the bank’s expense.
February 5th, 2009 at 2:44 pm
i was away on holiday when this letter was sent out didn’t know it was beening added and when i got home i had a whooping £300+ bill for going over, i’ve taken my case to the financial ombudsman and suggest everyone else should.The only way to beat the banks is when enough people make a fuss they back down like with the bank charges
April 29th, 2009 at 10:40 am
I’m a little late to the conversation but I agree with the general consensus…I’d rather plan where my money goes and use a service like Wonga for a bit of quick cash and avoid the big banks. The big banks do everything to take your precious pence and if you get upset and threaten to switch banks, they don’t even care. They are too big to notice one unhappy customer. Also, most people are too lazy or don’t want the hassle of switching banks, so they just stay put and bare it.
I’m pretty responsible with my money, but if I need some quick cash, I’ll use Wonga.
August 14th, 2010 at 7:11 am
iPhone App Marketing…
An interesting article on the topic…