/ Money

Charging to use a current account? It’s not for me

Chequebook and bank card

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

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Miss H. T. Porter says:
8 March 2014

My viewpoint is that they use my money in their lending, for which they get back extra money, and do not pay me any interest. If I am charged for using a current account, they are in effect charging me twice unless they completely pay me for using my money. Too difficult for them? Then they should really stop paying themselves all these bonuses.

If I choose to go overdrawn, I expect to pay for doing so. Banks are quite clever when inventing various ways to maximise these charges by splitting them into things like letters, interest on the debt, penalty payments et al. I don’t doubt that each category is set to cover the costs plus a little bit more. The small print may itemise these charges, but I agree with those who think that pages and mini booklets of the stuff don’t make for easy bed time reading. I couldn’t begin to judge whether these charges are fair or not because I have no access to the bank running costs or their risk assessments on bad debts. This part of the banking system has probably always been well run. Overdrafts are offered as one form of borrowing and there hasn’t been any suggestion that customers are being ripped off -the charges seem to have been accepted for what they are.
Likewise, current accounts have, by and large, been well run over the years, mine has been fault free for over fifty years. This day to day banking, the bedrock of the system, works because decent, honest employers work in branches and offices, without bonuses, and make it happen. They don’t deserve to be classed along side the people who have wrecked our economy.
If I choose to stay in credit, currently I don’t pay a charge for my banking. The bank makes money on my credit balance and spends some of it to run my account. If they introduce current account charges, then I shall be paying more for my banking than I do at present. Once they start to charge, there will be a regular annual increase in these charges. Since my banking has been “chargeless” for so long I shall be angry at this move.

For employers read employees.

Norman Naylor says:
8 March 2014

I agree entirely with the Which? take on this issue. When I read that the banks are sabre-rattling once again and on this occasion, riding upon their claim that charges are the key to transparency and competition, the phrase, ‘trying it on’, was the least offensive of the thoughts passing through my mind. The banks (and their shareholders) earn a great deal more from our money than the derisory amount, if any, paid out in interest.

So let’s not feel sorry for their ‘predicament’ and recognise the fact that they are testing the water and conditioning us for another raid our much ravaged and depleted finances. We need to oppose this proposal now, before the banks start getting a warm feeling about their prospects on this matter, and therefore I hope that Which? will seek our support to campaign strongly against it.

Norman, I think this may have been instigated by the Office of Fair Trading, not the banks. They have a concern to see charges made on current accounts to be more transparent – authorised and unauthorised overdrafts, forgone interest and so on. They also consider that lack of charging may be a barrier to new entrants (banks) into the personal current account market. They published a report last year looking at such issues. Or Which? may have information from another source. Perhaps they would provide a link to their source(s).

Lefty says:
9 March 2014

Providing you are in credit, there should not be any charge on your current account as the banks already use the credit amount by investing it on the over night banking syestem. In other words they are already getting money from the balances we hold in our current account every day.