Jeff Salway: New bank rules end payments waiting game

IN THE admittedly unlikely event that your New Year wishes included a challenge to the established banks and improved day-to-day banking, this has been your week.

First, the useful stuff. Many bank customers making payments by phone or online have until now had to wait three days for their payments to go through.

Under rules introduced last week, all but a few payments will now go through within a day.

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It’s not exactly radical, but for anyone facing urgent credit card or tax bills, it will be very welcome.

Many standing orders and one-off internet and phone banking payments are already processed within hours through the Faster Payments system.

But the changes, which came into force last week under new EU legislation, mean credit card bills, loans and tax payments can for the first time be processed on the same day.

Not all transfers that should go through Faster Payments actually have done so. For example, some banks have imposed limits as low as £50 on the standing orders they process through the service, while one-off payments have been restricted to as little as £300.

They will no longer be able to get away with this, as the new directives mean all standing order and one-off payments made through phone or internet banking will have to reach the recipient’s account by the end of the next working day.

There are still exceptions to be aware of, however. It doesn’t cover cheques, which is unfortunate for the millions of people who still rely on them, despite the well-publicised decline in usage.

Neither does it cover all accounts; some savings accounts are unaffected, meaning payments into or between cash Isas, for example, will still take three days or more.

But the rules apply to most instant access accounts – great news for savers who have until now had to factor in the delay. Banks and building societies will no longer be able to sit on transfers and pocket the interest that would have otherwise been paid on the money.

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In that sense it could prove another nail in the coffin of “free banking” as the industry seeks new ways to recoup lost revenue.

Credit where credit’s due

SOME see them as the “poor man’s bank”, but legislation coming into force today will make credit unions more relevant than ever. Membership of Scotland’s credit unions has risen over the last three years, due partly to demand for an alternative to the mainstream banks.

Now their popularity is set to grow further, with the rules allowing unions to take on members beyond their traditional base and promote their savings offers more effectively.

Until now credit unions have only been permitted to distribute retrospective dividends on savings accounts, but they will now be able to pay interest – and that means they will be able to compete for business on the all-important best-buy tables.

No one is expecting an instant flurry of new business for credit unions as a direct result of these changes. But in Scotland in particular – where one in 20 people is a member, compared with one in 65 across the UK as a whole – the new rules will ensure that credit unions will continue to thrive.

Competition on the high street

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THE credit union guidelines are not the only boost this week for those hoping for more challenges to the high street status quo.

Many people are looking towards Virgin Money, which, after buying Northern Rock, pledged a raft of new product launches in the early weeks of 2012.

It has been true to its word thus far. Its advertising campaign begins this week – expect to be suffering Branson fatigue by Tuesday – but the promised assault on the established banking brands is under way, with the launch of two savings accounts.

And they both look competitive. The Easy Access saver not only offers a decent rate of 2.85 per cent, but it is one of the few accounts that doesn’t come with a bonus period that means the rate plummets after a year.

It goes straight to the top of the best buy table for easy access deals without introductory bonuses, while the same rate is offered on the new Virgin Easy Access cash Isa.

So far, so good: simple, transparent, competitive. Keep it up and the ever-complacent high street names may finally face some genuine and much-needed competition.