As I wrote several months ago in my Financial Meltdown series, I took out a consolidation loan in January 2009 to pay off 2 higher-rated loans, and get in return one, cheaper, lower rate loan. The two old loans were with Barclays (my banking provider of choice), and so was the new loan.

I made an appointment with a Personal Banker in January, and proceeded to spend over an hour with her. I was open and honest, and she really spent time with me. I discussed my goals, where I was financially, and she talked through the options open to me. I left feeling very, very happy. I had finally taken steps to securing my financial future for the first time in my adult life and left with an even more positive view of my bank of choice.

The first of the two higher-rate loans was settled without complication. The other – due to the loan being created on the ‘old’ system but settled using the ‘new’ – refused to close in its entirety.  I was advised to “not worry about it” and it would resolve itself eventually.

The account remained attached to my online banking with a balance showing. I phoned every few months to check all was in order, and each time I was assured: all was in order. During each call, the balance remaining was described as simply the PPI refund that I had not had to pay during settlement. The ‘new system’ would get bored with it eventually and close it off.

On the 3rd July 2009 I received a ‘Loan Account Statement’ covering the 1st October 2008 to 2nd July 2009 listing a ‘Closing Balance’ at the end. No further correspondence was received and I took this to mean that the settled loan was in the final throes of being removed from my account. A little cheer was given, and the letter filed.

Fast forward to this month, and a Direct Debit for £7.83 bounced from my current account (as the instruction had been canceled by the branch when the old loan was settled). Curious as to what this amount was for, I phoned my branch. The lady I spoke to advised – after considerable digging – it was an attempt to take payment for the old loan still showing on my account. Due to limited information available to counter staff, she could not offer any further information.

Perplexed, I phoned the Barclays Loan line and spoke to a lending specialist, who could not answer why the payment attempt was made. Nor could she answer why it had taken over 10 months to attempt it. All she could tell me was I now owed Barclays £8.29 – courtesy of daily interest. I paid this with her by Fund Transfer, but she could not guarantee me that it would not be registered with the Credit Reference Agencies as a Late Payment.

In a letter to Barclays Customer Relations I penned:

“I find this incomprehensible and indefensible. Not only have I wasted most of this evening reviewing correspondence, bank and loan statements, and telephone records, but now fear negative reporting to my credit rating. Ostensibly, the payment is some 10 months late, but not due to any action or inaction on my part. When you settle a loan and receive repeated reassurances that everything is in order, is it unreasonable to believe that this is the case?

Currently, the loan account is registered as Satisfactory with no late payment markers. I want to ensure that this loan account is now marked as Settled without detriment to my credit history – for what is either a Personal Banker error; a computer error; or a combination of the two. I would also like to discuss the matter of compensating my time for having to be writing this letter in the first place.“

I love Barclays. But a relationship where they have treated me very well over the last 14 years is in danger of falling apart from a silly error on their part. The outcome of this complaint will very much determine where the remainder of my adult banking is conducted.

Tread carefully, Barclays. Very carefully indeed.

Have you ever been in conflict with your bank?

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My friends have so far looked at me sideways when I have explained that I plan on moving my money around every year, chasing the very best savings rates. They consider doing so an extreme waste of time as “the banks only screw you over anyway” and that a few percentage points make zero difference.

A few percentage points make ALL the difference. For a little bit of effort (generally about 2 hours a year), you can earn hundreds or thousands of pounds worth of extra interest, than if you left your money in the same place on an institutions Standard Variable savings account.

Don’t believe me? Let me show you. For the sake of argument, let us say I have £10,000 to save, and I am looking to put it in an account somewhere and let it build over time.

My Barclays Tracker Saver account pays 0.10% interest on balances over £50. It calculates daily and compounds monthly. After 12 months in those conditions, my savings would have grown by just £10. The bank has paid me just £10 to lend them my £10,000 for the entire year.

Daylight robbery.

Let’s open a new account with ING Direct instead. At the time of writing, they are guaranteeing new customers 3.20% under similar conditions otherwise to barclays, i.e. compounding monthly. For my £10,000 they will pay me £324.74 in interest. That is much better. But now my introductory offer has expired, I’ve dropped onto their Standard Variable saving rate of 0.50%. If I don’t move my money, how will it fair next year?

If I am lazy (and the bank hopes so), next year they will pay me just £51.74 in interest.

More than 6 times less than they paid last year.

Instead, when my introductory offer ran out with ING I moved my money to another introductory offer paying (for the sake of argument) 4%. Remember I have £10,324.74 to move courtesy of the 3.2% interest from ING last year, so I move that sum to a new Halifax account.

12 months later I now have £10,745.39. And after another move the next year that paid 4.5%, I have £11,239.03!

In 3 years the amount of savings I had has grown by £1,239.03 because of 2 hours work opening a new account and closing an old one each year. By the time you’ve run out of places to consider opening an account as a new customer, ING Direct have forgotten about you and you qualify as a new customer again.

If I had not chased the good rates and left it languishing in my original Barclays account, I’d have earned a paltry £30.04 over those 3 years. If I had not moved it out of ING when the first introductory offer ended, I’d have earned £103.74 in total.

By chasing the higher rate and moving my money every year, I would end up with £1,239.03 in interest alone.

If you have more to save then your returns will be even better.

Banks are relying on you being complacent with your money in the longer term. You can beat them at their own game with just a few hours work each year. Is rate chasing worth the time and effort annually? In my opinion you’re mad not to. It’s free money for minimal work on your part.

Are you a chaser,or is it all just a waste of time in your view?

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