Is your bank account really free?

21 August 2012

New research from Which? has revealed that customers with so-called 'free' bank accounts can still end up paying hundreds of pounds in charges.

According to the consumer champion, there is a huge variance in the level of fees charged by banks when account holders exceed their agreed overdraft limit. It found that charges for two days overdrawn a month without permission range from £120 a year - £10 a month - with the Halifax Reward Current Account to £900 - or £75 a month - with the Yorkshire/Clydesdale Current Account Plus.

Even customers with authorised overdrafts can still end up paying through the nose. RBS/NatWest and HSBC currently charge an APR of 19.9%, which exceeds the interest charged on many credit cards and personal loans.

Customers who keep their accounts in the black could also be losing out, according to the research, through lost interest and fees for withdrawing and spending cash abroad. It calculated that NatWest Select and Lloyds TSB Classic Account customers who keep an average £1,500 balance and make two £100 withdrawals and two £50 debit card payments overseas would lose £63 over a year.

Would you consider paying for your account? Vote in our poll.

Losing out

The research follows comments from banks that the way to avoid further scandals is to charge for bank accounts to avoid the need for hidden charges.

In July Lord Adair Turner, the head of the Financial Services Authority, suggested that the culture of free banking is holding back competition among banks and resulting in scandals like payment protection insurance mis-selling as banks look to recoup the costs of providing free banking.

Peter Vicary-Smith, chief executive at Which?, says: "When some people are paying £900 a year in bank charges it completely shatters the myth that banking is free. The suggestion that banks should increase charges to avoid more scandals defies logic and is a slap in the face for consumers who are being hit hard by one of the worst financial crises in recent times."

Add new comment