Banks shift towards fee-paying accounts

Fee paying account

Current accounts charging a fee increased by 48% between March 2008 and May 2010, according to new research.

There are now 49 current accounts charging a monthly fee - so called packaged accounts -compared to 33 just over two years ago, says data provider, Moneyfacts.

During the same two-year period, the average fee charged has increased by 29% – from £11.50 to £14.88. A general trend has also developed for companies to only offer their best products to their most profitable customers.

Darren Cook, spokesperson for Moneyfacts, says: “Banks are very keen to move customers onto a fee-paying account as they know in most instances the customer will pay the fee and rarely use the benefits attached.

“Once a customer is signed up to a fee-paying account, providers are normally very reluctant to downgrade them back to a standard account.”

Research released earlier this month by analysts at Defaqto showed only 6% of adults change their bank account each year. The main reason for this is that many people worry the switch will be a tricky process, resulting in direct debits or other payments going astray.

David Black, banking specialist at Defaqto, says: “Consumers should look at their current account and see if they can get a better deal elsewhere. There are some generous introductory deals available, which include high interest rates, 0% introductory overdraft rates and even a £100 cash gift.”

Currently, interest rates on current accounts are trumping many in the savings market, so it may be worth your while to shop around for a competitive rate and get away from paying fees.

If you’re thinking of switching current accounts, head to this guide to find out how.