Switch And Make £100!

With some banks charging for previously free banking services, we show you how to fight back by switching -- you could even make £100 for your trouble.

Are the days of free banking coming to an end? Just this month saw First Direct introduce a £10 monthly fee to any of its current account holders who fail to pay in £1k or more per month. And Citibank has just declared that its 150k Sterling Current account customers will be automatically moved to its Citibank Plus account, and charged £10 per month, come 1 April. Blimey!

So what's prompting these charges? The high success rate of consumers claiming back unfair banking fees is no doubt a major contributor. Banks don't like to lose money, and with more than a million of us having downloaded complaint forms from consumer websites already, according to Defaqto, they're set to lose a whole lot more.

Much in the same way that many credit card companies raised their interest rates when the Office of Fair Trading (OFT) made them reduce their fines for late payment, last year, banks will no doubt be hoping to recoup their lost revenue too. And, as many of us predicted, this is starting to occur in the form of banking charges.

Free banking in the UK

It's worth remembering that we are unusual in the UK for not being charged for our current accounts. But while we don't pay for personal banking, our fees and penalties, should we become overdrawn, are higher. Therefore, we could take the view that the people paying the excessive fees effectively subsidise the ones who never get into debt.

However, with so many of us successfully reclaiming our bank charges, and the OFT investigating the levels of those fees, the banks may be prompted into reducing those fees to a fair level, while applying a monthly banking fee to all customers. Indeed, Defaqto predicts that free banking could disappear within two years, with either flat monthly fees, or pay as you go charges, according to the services you use, taking its place.

Packaged accounts

Of course, a lot of people already pay for their banking. Those with packaged accounts typically pay £10/month for current accounts which include added extras such as annual travel insurance and roadside cover. Indeed, the Citibank Plus account mentioned earlier is a packaged account, offering travel cover and mobile phone insurance, amongst other perks.

However, you really need to check how useful these extras would be to you, before signing up. Although the bank may claim the package is worth hundreds of pounds, if you won't use most of the extras, and if you could buy equivalent cover for the ones you would for less than £120/year, the account is unlikely to be worth the money.

I for one would not relish the idea of monthly banking fees. And it's been encouraging to read that a number of banks have claimed to be committed to free banking, for the time being at least. What's more, some are even currently offering great interest rates and cash incentives to entice us to switch to their (free) current accounts.

The Halifax, for example, is offering a fantastic £100 to anyone that switches to one of its current accounts. You need to pay in at least £1k per month into the account and you must use its dedicated switching team to transfer direct debits and standing orders. You'll also be provided with a 120 day 0% overdraft to cover the time until the account is up and running. There are four accounts to choose from, including its High Interest Saver current account, paying a market leading 6.17%AER.

Alternatively, Alliance & Leicester (A&L) pays 6.1%AER on its Premier Direct current account, and if you can find an existing A&L customer to recommend you, you could both earn £25.

As always, if you're unhappy with your current account, consider switching -- you could even make some free cash. Additionally, if you have a bank account that you simply never use, it's probably worth closing it a (especially if it's a Citibank Sterling or First Direct account). And Citibank Sterling account customers should note that they can take advantage of their extras until 1 April for free -- if you don't want to be charged after this date you should switch to its Citibank Access account.

> Don't let the banks pinch your money!
> An End To Free Banking?
> Compare Current Accounts At The Fool