Money Insider: The end of free banking could be costly for all
Saturday 02 June 2012
At least a couple of times every year the doom-mongers declare that banks are going to start charging us for our current accounts, only for the claims to be forgotten a week later.
So what's different with the latest "free banking – the end is nigh" story?
Rather than the issue being raised by a consumer body or an industry commentator, on this occasion the free banking hornets' nest has been poked by Andrew Bailey, the soon-to-be-boss of the new Prudential Regulatory Authority.
Mr Bailey feels that free banking is a myth and encourages the mis-selling of products, singling out the PPI debacle as such an example.
He also wants to increase competition in the banking sector and believes that were the true cost of banking services visible, we'd see more customers switching accounts.
If you look at the issue from the banks' perspective, they provide us with branch networks, instant payment services, statements, cheque books, debit cards, internet banking and cash withdrawals from ATMs across the UK – and as long as you keep your account in the black it doesn't cost you a penny.
However, the main gripe over the years has been that the long list of banking services that many people get for nothing (and take for granted) is subsidised by stealth charges and high levels of commission from the cross sales of pension, life insurance and mortgage products.
Another bugbear is unauthorised banking charges, and even though these have reduced, in some cases the penalties are still excessive and it's quite easy for someone to accumulate £50 or more of charges in a single month.
There's also the matter of the hundreds of millions of pounds of credit balances held in current accounts on which the banks don't pay us a single penny. Will that change under the new regime? I think not.
I'm not sure what level of detail Andrew Bailey has gone into, but there are so many things to be considered if he wants to achieve his ambitious plan.
The questions that immediately spring to mind include: will the charging be on a fixed-fee tariff or a pay-as-you-go deal dependent on the number of transactions on your account each month?
Will the regulator put a cap on the amount customers are charged for unpaid cheques and unauthorised borrowing?
Does he expect all "in credit" and borrowing tariffs to be in the same format? This is not the case at present and makes it nigh on impossible for the man on the street to work out which bank offers the most cost-effective deal.
Will he insist that customers receive interest on current account credit balances, and what measures will he put in place to end the culture where bank staff are under pressure to meet sales targets in order to receive commission payments or bonuses?
Will the introduction of a new revenue stream mean we'll be rewarded with better levels of customer service, meaning fewer complaints to the ombudsman?
Although I can appreciate what Mr Bailey wants to achieve, I'm far from convinced that the vision will come to fruition any time soon.
If we end up paying for our bank accounts, I'm pretty certain we won't see a reduction in the cost of other financial products or services, and that by disturbing the hornets, many more of us will end up getting stung than the new regulator actually envisaged.
New best buy Isa from Virgin Money
With the cost of money market funds increasing due to continuing uncertainty in the eurozone, we're seeing more banks turning their attention to retail savings balances.
Among the best new savings rates over the past week is a one-year fixed-rate ISA from Virgin Money paying 3.3 per cent AER.
The account sits in the top three best buys, is available from just £1 and, unlike some competitors, it allows you to transfer balances from previous ISAs.
We may be heading out of the main ISA season, but this is an excellent deal and well worth a look if you haven't yet decided on a home for your 2012-13 tax-free savings allowance.
Locking away the maximum cash balance of £5,640 for a full 12 months will earn you £186.12 in interest – tax free.
Andrew Hagger – Moneynet.co.uk
Independent Partners: See how much you could save by switching credit cards. Compare now
A cautionary tale for ambitious would-be authors
X Factor judge will appear in court later this month
- 1 Gurdwaras-turned-food banks: Sikh temples are catering for rise in Britain’s hungry
- 2 Council bans use of word ‘Commie’ – but ‘fascist’ and ‘Nazi’ are fine
- 3 The poorest pay the price for austerity: Workers face biggest fall in living standards since Victorian era
- 4 Newly vegan Beyoncé wears fox fur to dine in meat free restaurant
- 5 'I'm experiencing austerity as well', says Princess Michael of Kent
- < Previous
- Next >
iJobs Money & Business
£44000 - £55000 per annum + Excellent Benefits: Pro-Recruitment Group: Confide...
£25000 - £35000 per annum + Benefits : Harrington Starr: PHP Symfony2 Framewor...
£40000 - £55000 per annum + Bonus and Benefits: Harrington Starr: A leading pr...
£50000 - £60000 per annum + Bonus + Benefits: Harrington Starr: Market Data An...
Day In a Page
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.
John Lennon's childhood home in Liverpool to be sold at auction. Guide price: £150,000-£250,000.
A six-bedroom detached period property with secluded gardens, ample parking and a double garage in Rye, £675,000.
A large split-level property with three double-bedrooms and roof terrace, close to Crouch End Broadway, £625,000.
A charming barn conversion in the picturesque Cotswold village of Ilmington with three bedrooms, a detached garage, workshop and beautifully manicured gardens £675,000.
A three-bedroom new build, ground-floor flat with two bathrooms, close to Bermondsey tube, £445,000.
A three-bedroom house in an enviable new development moments from Oxshott High Street, with secluded garden and decked area, £385,000
A two-bedroom split-level flat with stunning south-west facing roof terrace in the popular Brondesbury Conservation Area, £549,950.