The introduction of current account charges has been suggested as the remedy to a variety of financial ills over the years. Most recently, it’s been proposed to tackle banking transparency – but is this the solution?
Now, the first thing to remember is that banking is not free in this country – contrary to what’s commonly believed. UK banking customers can pay up to £2,197 per year to their banks in the form of charges arising from overdrafts and bounced payments.
As a result, it’s estimated that the banks rake in nearly £9bn in charges and forgone interest on our current accounts. So any extra charges could be on top of the considerable amount the banks already receive from their customers.
Charging all bank account users
It’s recently been suggested that there could be a charge on all current accounts – regardless of debit, credit or additional features, to increase bank charges transparency. This is because the existing charges operating on most current accounts are confusing to customers, who often feel these charges to be ‘hidden’ in the small print. Supporters argue that a flat, upfront charge would allow customers to compare different accounts and switch more easily.
However, while there’s a clear need for transparency around charging, there’s no guarantee that an upfront charge would bring this about. Would current account charges see the end of the banks’ myriad of complicated overdraft charges? Or make them pay more interest on current accounts? It seems unlikely.
Meanwhile, what about those who never use their overdraft – is it right to make these customers contribute fees to cover costs created by those who do?
Banking charges add to the squeeze
Finally, there are vulnerable, low-income customers, such as those surviving on the state pension, who may already find it difficult to take part in traditional financial activity. Do we really want to create yet another barrier between these customers and the mainstream of financial service provision at a time when we should be thinking about ways to reduce the numbers of the ‘unbanked’?
If banks want to be more transparent, they could offer downloadable electronic information about how you use your account. This would enable comparison sites to be developed so that customers can be clear about how much they currently pay and whether there’s a better deal available elsewhere.
So what do you think? Do you buy the argument that an upfront fee would create more transparency? Or would it just be business as usual with a charge on top?
Should you pay for a standard current account?
No (81%, 1,458 Votes)
They're not free anyway (16%, 284 Votes)
Yes (3%, 63 Votes)
Total Voters: 1,805