Charges for cash withdrawals will hit hard-up hardest

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The Independent Online

Hard-up families were hit by a major banking blow this week. Royal Bank of Scotland (RBS) – which owns NatWest – said it would ban customers with basic accounts from using cashpoints operated by other banking groups.

The bank's move is to save money and it rightly points out that Lloyds Banking Group – which includes Halifax – already restricts its basic bank-account holders from using rival cash machines. But if RBS does enforce the ban, it could lead to all the other companies offering basic bank accounts doing the same, according to Nationwide. It warns that RBS's move could be the tipping point for other current-account providers to follow.

"When one player withdraws from the market it increases the cost burden on the others," says the building society's head of policy, Gary Follis. "It's not hard to see how this could quickly become a slippery slope, and if it does, it will be the poorest members of society that lose out."

If it happens, it will be bad news for vulnerable people. Basic bank accounts are offered to people who otherwise wouldn't qualify for a bank account. They were set up by the banks – with some major government nudging – in the middle of the last decade to tackle financial exclusion. They don't allow overdrafts, but do give people on low incomes crucial access to basic financial services.

That access is important as it means they can pay bills electronically – saving money – and start to budget properly, rather than having to pay by cash. The theory is that anyone using a basic bank account may graduate to a full banking service in due course.

If they lose access to free cash withdrawals – a privilege enjoyed by everyone else – that would penalise them and make them second-class citizens. That is precisely the opposite of what should be happening to such people. The more they are treated as second-class citizens because of their low income, the more they will stay on the fringes of society. And the recent riots show what can happen to those who feel excluded from the mainstream.

The average age a first-time homebuyer expects to be when they can afford to buy a property is now 35, according to research issued today by the Post Office. Half a century ago, the average first-time buyer was actually just 23. Is this trend towards young adults being a decade older before making a first step on the property ladder something to lament? I'm not sure that it is.

Buying a property is a massive investment and potential risk. Someone in their early 20s taking on the financial responsibility will quickly discover that the expense of maintaining a property – on top of massive mortgage costs – can outweigh the benefit, especially in light of the potential detriment to their lifestyle. The mantra that you should get on the property ladder as soon as you can is totally flawed when prices aren't rising, as is the case now.

For that reason youngsters struggling to get on the mortgage ladder should concentrate on enjoying the advantages of renting. The key financial one is that landlords have to cover maintenance costs, which can be thousands in a year. But there's also a lifestyle advantage in that moving to a different rented home is much easier – as well as being much less costly – than buying a new home.