Current account customers unwittingly rack up significant charges each year, new research reveals.
According to automated savings assistant company Plum, the average current account customer notches up £152 per year in hidden fees from their bank account. For those customers with an overdraft function on their account, this figure rises to an average of £221.
Taken at a national level, this means banks took a staggering £9.9 billion in charges from customers in 2017.
Working in partnership with data firm Truelayer, Plum has found that more than half (56%) of fees came from overdrafts, both planned and unplanned. One in 10 (11%) charges resulted from hefty foreign exchange fees, and late transaction fees accounted for 6%.
However, more than one in four (27%) of fees were described by the firm as ‘other’. This includes monthly account fees, “unspecified” bank fees, and bounced subscriptions.
Charges on average cost customers between £5 and £10 per transaction. Plum says it is very easy for customers to accumulate these without realising as banks may hide fees in the description of a transaction rather than listing them separately on bank statements.
A win for Open Banking
Using new Open Banking rules, customers can now use Plum’s free ‘fee fighter’ tool available via Plum’s website to determine how much they were charged in fees in the last year by their current account.
Plum uses Artificial Intelligence (AI) to process these transactions and determine what fees customers are paying that they may not be aware of. Before Open Banking arrived, there was no real way for consumers to use the data their banks held to good effect.
Victor Trokoudes, chief executive and co-founder of Plum, comments: “For too long, banks have been guarding customer data, and have been purposely vague about the true cost of overdrafts, borrowing, and FX. Now that Open Banking is a reality, people can see in real time what charges they are being asked to pay by the banks and therefore take control of their money to avoid paying them.
“Enabling people to take control is why we launched Plum and that’s why we’ve created Fee Fighter which, in less than five minutes, helps people find a better deal and avoid fees when it comes to banking. We want to help people stand-up to their banks and demand a competitive deal. The more people that switch, the more that banks will be forced to compete for their business and fight to retain loyal customers.”
Currently the tool is available to use for customers of the following financial providers:
- American Express
- The Co-operative Bank
- First Direct
- Lloyds Bank
A spokesperson for UK Finance, the banking trade body, comments: “Banks compete to offer the best possible services, and customers can shop around to find a deal that best suits their needs.
“The industry continues to work closely with the regulator to ensure customers know exactly what they’re paying for, including through standard terms and price comparison tools.
“If anyone is concerned about their finances they should speak to their bank immediately.”