And I’m reminded of this article from the Money Box’s Paul Lewis: How banks exploit us by making services too complex - How banks exploit us by making services too complex
Banks make money because they are better at arithmetic than their customers. They know that if they fix monthly repayments on a credit card at 2 per cent of the outstanding amount with a minimum of ÂŁ5 it will take 25 years to clear a ÂŁ2,000 debt and they will have been paid ÂŁ3,500 in interest.
They know that after 43 years of charging 1.5 per cent a year on a pension pot with 4 per cent growth they will have taken the equivalent of a third of the pot. Even for the section of the population that is not functionally innumerate those are difficult sums.
And where the arithmetic could be simple the banks devise ways to make them complex. A theme that has run through my working life is explaining complex things to people in a simple way. Over the years I have come to believe that this process of making things complicated — complexification, as I call it — is deliberate. And it is anti-competitive.
Imagine if you went to fill up your car. The local garage is Esso and the price is 136.9p a litre. But Sainsbury’s sells it for 132.9p a litre. So you drive the extra mile to Sainsbury and save yourself a couple of quid.
Suppose instead that your garage charges 129.9p a litre plus £5 to enter the forecourt. That would be dearer. But if you agree to make it your petrol station for the next 10 visits it waives the forecourt charge. Is that still cheaper than Sainsbury’s at 132.9p, which charges you £2 to visit and then gives you back £1 if you fill up for two consecutive times?
Such an approach would be retail madness. But it is often the way you are charged for personal finance products.
I won’t post the whole thing, but the article goes on to talk about how all sorts of products are made more complicated than they need to be.
Routine (“every day”) spending on credit card makes basic budgeting more complicated than it needs to be and I’ve pretty much given up on it, despite losing out on cashback. It’s madness that spending on credit gives you extra legal protections (see above for how apparently simple financial decisions are made needlessly complex) but this means credit cards are still useful occasionally.
Would I use a monzo card? Maybe. I keep asking myself this every time this thread pops up. Despite my reluctance, if monzo offered even 0.25% cashback (in line with Lloyds and barclaycard), and bill splits worked on credit card purchases, I probably would end up using it for every day purchases.