Why cash machines are under threat

Gareth Fuller/PA

Cash machines are under threat in some of Britain's less affluent communities due a decision by two banking groups to restrict access to the LINK network.

It is feared that if other banks follow the lead by Lloyds and RBS in limiting some customers to only using own their bank's cashpoints, one in three machines could be at risk of closure in certain regions.%VIRTUAL-SkimlinksPromo%
The Lloyds Banking Group (Lloyds TSB and Bank of Scotland) and RBS (Royal Bank of Scotland and Natwest) have made the decision to bar customers with basic bank accounts from using machines run by anyone but their own bank.

Basic bank account customers tend to be those on a limited budget as the accounts do not have an overdraft to encourage stricter money management. However, it is these customers who use cash more readily in order to budget and keep track of their money.
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Now cash machines that have seen a drop in transactions as a result of the Lloyds and RBS move are at risk of closure. The affected regions are mainly rural or deprived urban areas, which have already been hit by many bank branch closures.

Restricted access
The restrictions undo five years of advancements in the cash machine network, which has seen the number of free-to-use machines increase from 36,900 in 2007 to 43,900 in 2011. Free machines now account for 97% of all cash withdrawals.

In July the Citizen's Advice (CAB) published the results of a study into free cash machine access. It found that while on the whole experience was positive with just 6% of people reporting trouble accessing their funds for free at an ATM, this figure was three times higher for those that held a basic bank account with a bank that restricted access to the LINK network.

The CAB said: "There is a very real danger that other banks will follow this decision [by RBS Group and Lloyds] and remove the possibility for their basic bank account customers to access the link network.

"We sincerely hope that they will not choose this route and would also call on those banks which have brought in this restriction to reverse their decision as soon as possible."

According to the Daily Mail, RBS says that restricting access will save £10 per account each year in fees, which translates to just over £10 million a year. Lloyds estimates it saves £12 per account each year.

Impact on customers
If ATM closures take place, vulnerable customers of these banks will be faced with limited options. Alternative methods of accessing cash such as through a Post Office counter or via cashback are not acceptable solutions as using cashback requires purchase which can be an extra unnecessary expense, and Post Offices are not always accessible.

So these customers will either have to travel further to access their money or change their account. However, being able to upgrade from a basic account with their existing provider or taking their custom elsewhere will largely depend on whether banks and building societies will allow it.

The CAB highlights that for the banks and building societies that do offer basic bank account holders more flexibility and convenience, the fear is that they will be bombarded with more of these less profitable accounts than their competitors.

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Why cash machines are under threat

More than 46,000 of 106,000 the complaints received by the FOS in the second half of last year related to payment protection insurance (PPI). And the organisation is expecting to receive a record 165,000 PPI complaints in 2012/2013.

The huge numbers are due to the PPI mis-selling scandal that should now be a thing of the past, but there is no doubt that the insurance, which can add thousands to the cost of a loan, is highly unpopular!

(Pictured: Martin Lewis after the PPI payout ruling)

Complaints about mortgages jumped by 38% in the last six months of last year, the FOS figures show, compared to an increase of just 5% in investment-related complaints.

Common gripes about mortgages include the exit penalties imposed should you want to sell up or change you mortgage before a fixed or discounted deal comes to an end, and the high arrangement fees charged by many lenders.

While there is nothing in the data released by the FOS about the number of complaints relating to savings accounts, hard-pressed savers have been struggling with low interest rates for several years now.

You can get up to 3.10% with Santander's easy-access eSaver account, but many older accounts are paying 1.00% or less and even this market-leading offer includes a 12-month bonus of 2.60% - meaning that the rate will plummet to just 0.50% after the first year.

Banks are imposing the highest authorised overdraft interest rates since records began, with today's borrowers paying an average of 19.47%, according to the Bank of England.

A typical Briton with an overdraft of £1,000 is therefore forking out around £200 in interest charges alone. Coupled with meagre returns on savings, it's enough to make your blood boil!

While authorised overdrafts may seem expensive, going into the red without permission will cost you even more due to huge penalty fees.

Barclays, for example, charges £8 (up to a maximum of £40 a day) each time that there is not enough money in your account to cover a payment.

If you need to send money abroad, the likelihood is that your bank will impose transfer charges - and offer you a poor rate of exchange. Someone transferring a five-figure sum could easily lose out by £500 or more as a result.

The good news, however, is that you can often get a better deal by using a currency specialist such as Moneycorp.

Automated telephone banking systems, not to mention call centres in far-flung parts of the world, are one of our top gripes - especially as we often encounter them when we are already calling to report a problem.

In the words of one disgruntled customer: "What is it about telephone banking that turns me into Victor Meldrew? Well, maybe it's the fourteen security questions, maybe it's the range of products that they try to push or maybe it's because I'm forced to listen to jazz funk at full volume while my phone bill soars.

"Actually though, I think it's because the people I eventually speak to rarely seem able to solve the issue I'm calling about."

The days of a personal relationship with your bank manager are long gone - for the huge majority of us at least.

When ethical Triodos Bank investigated recently why around 9 million Britons would not recommend their banks to a friend or relative, it found that almost a third felt they were not treated as individuals. Another 40%, meanwhile, were simply disappointed with the customer service they received.

When you're in a rush, the last thing you want to do is wait in a long queue at your local branch.

Researchers at consumer champion Which? recently found that most people get seen within 12 minutes, but you could have a much longer wait if you go in at a busy time. Frustrating stuff!

The Triodos Bank research also indicated that the bonus culture that ensured the bank's high-flying employees received large salaries, even when it was making a loss at the taxpayer's expense, was hugely unpopular with consumers.

About a quarter of those who would not recommend their current banks said this was the main reason why. And with RBS executives sharing a £785 million bonus pool despite the bank, which is 82% publicly owned, making a loss of £2 billion last year, it's not hard to see why.

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