Talk of card charges premature says HSBC
Reports this morning that we could soon be paying annual charges of £11 to use our debit card and £25 to use our credit cards as well as forking out every time we use an ATM are premature, according to HSBC.
Concern about the introduction of new charges is mounting due to speculation that the European Commission (EC) could soon cap or put an end to charges retailers pay banks for each card transaction - known as interchange.
The measure could potentially cost the banks £2.4 billion, which would have to be passed on to consumers and threaten free banking in the UK, according to a report from Europe Economics and MasterCard.
The report cited the experience of countries including Spain and Australia and warned that customers there 'lost out' by having to pay fees and high interest rates when similar changes were implemented several years ago.
While there has yet to be any official reaction to the EC proposals expected to be announced on 17 July from UK highstreet banks, James Thorpe, a spokesperson for HSBC, told Moneywise: "HSBC has no plans to introduce any upfront charges to our UK cards. With the EC paper not yet released, speculating as to what the possible consequences may be is unlikely to be helpful."
He added: "It may also not be appropriate to directly read across the experience of consumers in other countries, many of which don't have a free in-credit banking proposition to start with."
Cardiff-based business owner James Davies told Moneywise he also thinks new charges are unlikely: "The credibility of bankers in the UK is at an all-time low. Confidence within the finance industry is fragile at best; and with the possibility of introducing fee-based ATMs the banking industry would have to brace itself for an almighty backlash."
James Hickman, managing director at foreign exchange specialist Caxton FX, said the EC move will simply continue the general shift away from seemingly free banking services. "We are already seeing an increase in paid-for banking services. Many current accounts now charge a monthly fee. This trend will continue and I would expect that very soon free banking will be a thing of the past."
However, he doesn't think a new wave of card charges is imminent: "Interchange, which is what the retailers pay to the banks when they accept a card payment, has been declining over the past three years. Banks have been aligning their business models to cope with this. I would not expect to see a sudden increase in charges, just fewer banks offering free banking services."
Meanwhile, the UK Cards Association warned: "The EC intervention will not help consumers. More than likely it will lead to the end of free banking in the UK. We are really concerned that this could be really disruptive to free banking and have consequences to UK consumers who benefit from it."
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.