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.