An End To Free Banking?

We've been used to having the option of free banking facilities for some years now - is the end nigh?

The mounting surge of customers rushing to reclaim 'unfair' bank charges following a campaign started by TMF Vertigo last May has led to rumours that banks are planning an end to free banking. Well, if they're having to pay out millions in refunds, they've got to get it back somehow, I suppose.

It all started last April when the Office of Fair Trading ruled that penalty charges levied by credit card lenders were so excessive that they could be considered illegal. Banks are only supposed to charge the actual cost of dealing with a customer who's fallen behind with payments. It intimated it would consider similar penalty fees charged by banks for unauthorised current account overdrafts to be unfair too, although the OFT has not yet definitely ruled on that yet.

Since then a growing number of people have been challenging the banks to re-assess the charges they made in the past - you can go back as far as six years - and threatening action in the small claims court. And, as no bank wants to be a test case in the courts, they've been stumping up.

Not surprisingly, the banks are teed off at having to give back money to their customers so they've started making noises about charging monthly fees for customers running current accounts as an alternative money-making option.

These so-called packaged accounts usually offer some 'freebies' such as travel and car breakdown insurance in order to persuade you that you're getting value for money for the £10 or £15 you pay each month. But most of the 'perks' can usually be bought more cheaply elsewhere.

To my mind, if my bank decided to charge a fee for each of the current accounts I have, I'd take a closer look at the Basic Bank Accounts on offer as an alternative. These accounts are designed to enable people on low incomes or with bad credit histories to open a bank account -- you have to do without overdraft facilities and, usually, a chequebook. But the deal is that the service is free unless a direct debit or standing order bounces.

As it happens, I suspect that competitive pressures will mean there are always going to be some free current account facilities available. The banks can hardly form a cartel and agree that all current accounts must charge a fee because I suspect they'd find themselves under investigation by bodies such as the Office of Fair Trading and the Competition Commission!

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