Cash too expensive for you?

In the news today, a story about a woman taking BT to court for charging her a handling fee for cash. In a way I can see her point – most businesses will actually offer you a discount for paying in cash, while BT will charge you more. Also for paying by credit card, debit card, cheque etc.

Thing is – and I hate to say this as I’m not BT’s biggest fan – for once I think they’re right. You set up a direct debit and BT then has to do pretty much bugger all to get your cash each month. If you pay by cheque, credit card, cash in an envelope, babies’ fingers or whatever then they have to process it.

Should her case come through with her victorious then – after lengthy appeals, I’m sure – BT may be forced to drop the charges. Along with every other company that has a similar fee structure in place. This includes most utilities companies, insurance brokers, finance / loan agencies…

So great. Savings all around, yes? Erm. No. All that will happen is that the fee will be removed and everyone’s basic bill increased to cover the cost of getting money from people who don’t use DD.

The poverty argument used in the article is completely moot. “Many people, especially those on the margins of society and who are on low incomes find it very difficult to find any increase for any bill” it says. Simple solution – organise a direct debit so it’s paid from your bank account. Don’t have a bank account? Well get one. The UK is one of the few countries I know of where banking is – if you don’t go overdrawn etc – essentially free.

Her argument that “On a 10 pound note it says ‘I promise to pay the bearer on demand the sum of ten pounds’, not ten pounds plus a £1.50 handling fee” is bollocks. It’s true – it doesn’t say there’s a handing fee. But she’s not paying a handling fee, she’s paying for the time spent by BT on sorting out her payment which they’d not incur if she used DD.

Buy a book from Amazon and they charge you delivery if you spend less than £15. Is that fair on people who don’t want to spend that much? Why should a person who only wants to buy one paperback help reduce costs for someone who wants to buy three? Because it’s cheaper for the company to ship three than ship one. Likewise for BT, it’s cheaper to collect fees by DD than any other method. Rather than the DD users being charged for everyone else, the ones who create the charge pay for it.

Given that any person in the country can get a bank account (illegal immigrants aside) and set a DD up, she hasn’t got a leg to stand on as far as I can tell. The option is there for her to avoid these charges. It’s an option she can take and has the facility to do so.

Unless I’m mistaken? Are there grounds where someone could be refused a bank account / direct debit? And if this is the case – perhaps based on a poor credit rating – wouldn’t they likely be refused a phone connection anyway?

In fairness, my argument falls apart if the charge levied for non-DD payment is out of proportion to the amount it costs the company to retrieve the cash. Then again, BT could always put this down to the fact that it "costs more to chase people who do not pay". A kind of insurance for itself.

9 thoughts on “Cash too expensive for you?”

  1. Well I never thought I’d disagree with Iain, but I couldn’t disagree more. Before I married my wife, she was a single mother at college, and virtually no bank would give her a current account, she was turned down by most of the major high street banks, finally getting an account at Halifax. The simple reason is they won’t make money out of her. Another person I know (no names) has a very poor credit history (from many years ago), and although has no problem getting utility supplies, still has a problem getting a current account, and the very few who have accepted have charged fees. Every other type of business accepts cash, so BT should. It’s legal tender!!!

  2. Well, I’m always prepared to stand corrected and I have been. I still do see it from BT’s viewpoint, though – it costs them money to accept cash whereas DD is (in comparison, I suppose – no figures to hand) effectively “free”.

    We all know that credit card companies charge fees, and I do think it’s acceptable that some companies pass these on (unless they charge significantly more than the fee as a “handling charge”) if it reduces costs elsewhere.

    If someone is paying cash at a BT shop, for instance, there should be a lower charge (or none) as the facility is there and staff already in place to deal with it. If someone pays via the Post Office, I’m sure they take a slice as a handling fee – and I see it fair that this is handed on.

    OK, then we get into arguments about little old ladies who can only get to a PO branch and not 30 miles to the nearest BT outlet…

    How much money did BT make last year? 😉

  3. If receiving cash electronically were easy then why would BT charge you their admin fee if you want to pay by standing order – hell, they don’t even have to do anything then.

    Paying by DD gives them the opportunity to take from your bank account any amount they want – any problems you have to sort out after the event.
    Perhaps we should be charging them an access fee for the privilege of having free access to our bank accounts.

    Even if you pay at a post office, they do not put the cash in the post, they wire it across electonically (in fact BT probabably still have a savings account there for a rainy day), PLUS they have the bonus of actually knowing they receive the payment, as opposed to a potentially refused DD.

    Whichever way you spin it – I don’t think you should be charged extra for paying in legal tender currency.

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  5. Hehe – hi, Andraz! For those who didn’t notice the little badge at the bottom of the post, it’s a new toy I’m playing with for Blogger and WordPress (and Typepad, I think, but I don’t use that).

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  6. Adam – isn’t there a fee for standing orders? I’m honestly not sure off the top of my head what the difference is between a standing order and a DD. I *think* a SO always for the same amount and is “pushed” from the bank. A DD can be for a variable amount and is “pulled” by the company you’re paying.

    As such, DD is guaranteed in some way. SO is kind of like cash. The company doesn’t have to vet you for SO. I have made donations to some charities which accept SO instead of DD for some reason.

    The argument I think that underlies it is DD is “safer” as well as cheaper for them. It seems from Dale’s message that to get a bank account that’ll set you up with DD you must have passed some kind of credit checks already. As they were quoted as saying in the article, anything involving cash payment (SO, wire transfer etc) involves a risk that the payment won’t be made. I guess there’s something in the rules with DD that this is less likely or they have some fallback or guarantee if it does.

  7. For both DD & SO you need a bank account – therefore you have passed the same credit checks :o)

    No fee for SO’s, at least not on my accounts – I prefer them, as I have control over them, as opposed to a company taking an arbitrary amount, that I may not get chance to approve

  8. Just another page of the rich text that is……rip off britain……god ! I’m begining to sound like Jon Gaunt

    JVIP

  9. I have no idea who Jon Gaunt is, but if he reckons the UK is becoming a rip off (or already is one), he’s right. Ridiculous import duty prices, massive taxes on taxes on taxes… and we have nothing to show to it compared to many other countries.

    I’d honestly not mind being taxed so much if we had a nice society, efficient healthcare, effective police, affordable essentials and the like – as well as staff involved in them who are well-treated. For example, the police aren’t effective because they’ve got a horrendous amount of problems to deal with, crap all resources, poor reward (so not too many people wanting to join) and what seems to be every government policy and loophole working against them.

    Basically, I don’t trust the government to spend my taxes efficiently or effectively.

    Adam – I think I’ve sussed one difference between SOs and DDs. If you cancel a DD, the company know about it *before* a payment bounces as they’re notified. It’s a 2-sided thing. A SO is purely voluntary on your side, so you can cancel and they won’t know about it until you’ve failed to make a payment. I think that one may fall under the “having to chase people who default” heading.

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