Don't want to pay for a current account? You still don't need to

Vote with your feet and switch banks if you don't like their attitude, says David Prosser

First Direct's decision to begin charging thousands of customers for their current accounts has prompted fears that other banks will follow, spelling the end of free banking in the UK. In fact, say experts, the move should simply serve as a reminder to millions of customers that changing account provider can be a valuable exercise.

First Direct announced on Tuesday that around 200,000 account holders will face a new £10-a-month charge from the phone and internet bank. Customers who pay less than £1,500 into their current accounts each month will have to pay £120 a year, unless they also have other First Direct products.

Chris Pilling, the bank's chief executive, admits the move may be unpopular with many customers, but says it reflects the expense involved in running smaller accounts. He also accepts that pensioners could be hit by the charge, as could customers who take home less than £1,500, the equivalent of a salary of £24,000 a year before tax.

In some cases, the £10-a-month charge could prove even more expensive. First Direct has around 40,000 "dormant" accounts not used by customers - the monthly fees could push some into unauthorised overdrafts, when additional charges would be incurred.

However, Pilling is unrepentant. "We are very upscale in our customer base," he argues. "We are being clearer about who First Direct is appealing to."

Put another way, say critics, if you don't earn much, or honour First Direct with all your business, you're going to start paying through the nose.

Many customers may not like that message. "Encouraging customers to take out additional financial products or to deposit £1,500 a month to become exempt from a monthly fee will make customers rethink their misplaced loyalty," says Nick White of price comparison service uSwitch.

Stuart Glendinning, of price comparison service Moneysupermarket, also thinks First Direct customers should now consider moving elsewhere. "First Direct has a well-deserved reputation for good customer service, but several other banks have now caught up," he says. "There are also better propositions in terms of both interest rates on credit balances and overdraft charges."

Five banks are currently cornering the market in account switches, according to Glendinning. Alliance & Leicester, Halifax, Lloyds TSB, Nationwide Building Society and Smile all offer strong credit or overdraft rates, or both. As such they should appeal to all First Direct customers - not just those facing the £10 charge - as well as account holders at other less competitive banks.

Similarly, a spokesman for the consumer group Which? described First Direct's decision to introduce charges as "a shame" and urged customers to consider switching. The group's Switch with Which? campaign was set up to persuade people to move bank.

Andrew Haggers, of personal finance analyst Moneyfacts, believes the First Direct move could be just the tonic the Which? campaign needs. "Customers have been somewhat lethargic in switching current accounts in the past, purely on the basis of interest rates on competitor products," he says. "When monthly charging and customer service levels are thrown into the equation, will these factors be the catalyst to make them vote with their feet?"

If so, First Direct could find itself with a double problem following the move. Not only will some customers leave, but administration costs could rise too.

The bank has thousands of customers who set up accounts simply to grab the £50 joining bonus First Direct has offered in recent years. Glendinning thinks this is one reason why the bank has so many dormant accounts, but he says these customers may not necessarily disappear. "All they need to do to avoid the £10 charge is open a savings account with £1," he says. "That could leave First Direct with two dormant accounts to cope with."

Last chance to find cheap plastic

* Anyone planning to put Christmas on plastic needs to apply for the best deals now. Barclaycard, Britain's biggest lender, says it takes up to 10 working days to get new credit card accounts up and running.

* In any case, good value credit cards may not last long into the new year. According to a report from PricewaterhouseCoopers, many lenders are intending to introduce new charges, such as annual fees. But which credit card will suit you best in the run-up to Christmas and beyond? There are three options to consider.

* If you're paying interest on a large credit card balance, you need the best balance transfer deal. Moneyfacts recommends GE Money, Cheshire Building Society or Virgin, all of which offer 12 months at 0 per cent on balances transferred to them. Be careful not to put new spending on the cards, because interest charges are payable and your repayments will reduce the balance transferred first, while you rack up costs.

* If you need a card for spending and won't be able to pay the bill in full in the new year, Moneyfacts suggests GE Money or Marks & Spencer, which offer 0 per cent for 12 months on new purchases. Nationwide Building Society offers nine months' interest-free credit.

* For customers who pay their bills in full each month, Moneyfacts like Morgan Stanley, Yorkshire Building Society and Norwich & Peterborough Building Society. All offer decent rates of cashback on spending.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
people'It can last and it's terrifying'
Sport
Danny Welbeck's Manchester United future is in doubt
footballGunners confirm signing from Manchester United
Sport
footballStriker has moved on loan for the remainder of the season
Sport
footballFeaturing Bart Simpson
PROMOTED VIDEO
New Articles
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
News
The five geckos were launched into space to find out about the effects of weightlessness on the creatures’ sex lives
i100
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
News
i100
Life and Style
The longer David Sedaris had his Fitbit, the further afield his walks took him through the West Sussex countryside
lifeDavid Sedaris: What I learnt from my fitness tracker about the world
Arts and Entertainment
Word master: Self holds up a copy of his novel ‘Umbrella’
booksUnlike 'talented mediocrity' George Orwell, you must approach this writer dictionary in hand
News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SQL Implementation Consultant (VB,C#, SQL, Java, Eclipse, integ

    £40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...

    Head of IT (Windows, Server, VMware, SAN, Fidessa, Equities)

    £85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...

    Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

    £40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

    SQL DBA/Developer

    £500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...

    Day In a Page

    'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

    'I’ll tell you what I would not serve - lamb and potatoes'

    US ambassador hits out at stodgy British food
    Radio Times female powerlist: A 'revolution' in TV gender roles

    A 'revolution' in TV gender roles

    Inside the Radio Times female powerlist
    Endgame: James Frey's literary treasure hunt

    James Frey's literary treasure hunt

    Riddling trilogy could net you $3m
    Fitbit: Because the tingle feels so good

    Fitbit: Because the tingle feels so good

    What David Sedaris learnt about the world from his fitness tracker
    Saudis risk new Muslim division with proposal to move Mohamed’s tomb

    Saudis risk new Muslim division with proposal to move Mohamed’s tomb

    Second-holiest site in Islam attracts millions of pilgrims each year
    Alexander Fury: The designer names to look for at fashion week this season

    The big names to look for this fashion week

    This week, designers begin to show their spring 2015 collections in New York
    Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

    'I like Orwell's writing as much as the next talented mediocrity'

    Will Self takes aim at Orwell's rules for writing plain English
    Meet Afghanistan's middle-class paint-ballers

    Meet Afghanistan's middle-class paint-ballers

    Toy guns proving a popular diversion in a country flooded with the real thing
    Al Pacino wows Venice

    Al Pacino wows Venice

    Ham among the brilliance as actor premieres two films at festival
    Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

    Neil Lawson Baker interview

    ‘I’ve gained so much from art. It’s only right to give something back’.
    The other Mugabe who is lining up for the Zimbabwean presidency

    The other Mugabe who is lining up for the Zimbabwean presidency

    Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
    The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

    The model for a gadget launch

    Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
    Alice Roberts: She's done pretty well, for a boffin without a beard

    She's done pretty well, for a boffin without a beard

    Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
    Get well soon, Joan Rivers - an inspiration, whether she likes it or not

    Get well soon, Joan Rivers

    She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
    Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

    A fresh take on an old foe

    Doctor Who Into the Dalek more than compensated for last week's nonsensical offering