David Prosser: Not currently pulling in the punters
Wednesday 05 August 2009
Outlook One reason banks give for not lending greater sums at very low interest rates is their desire to be fair to savers as well as borrowers. That's laudable enough, but if the current account market is anything to go by, you shouldn't expect a great deal if you're in credit with your bank.
Three years ago, before the credit crisis, the battle for current account customers was fierce. The big five banks sensibly reasoned that if they could get customers for these very basic products, they'd be able to sell them all sorts of other products and services. A price war ensued.
No longer. An interesting piece of research published by the personal finance specialists Moneyfacts yesterday reveals that 83 per cent of current accounts now pay less than 0.1 per cent annual interest on credit balances. Some 49 per cent pay no interest at all.
The deterioration in value has been drastic and quick. Even a year ago, the respective figures were only 57 per cent and 19 per cent. Gone are the days when banks tried to draw in new customers with a potentially loss-leading current account proposition.
Lower base rates, by the way, do not fully explain what has gone on. If they did, you would expect banks' overdraft rates to have fallen too – in fact, the average current account overdraft is now priced at 13.52 per cent compared to 12.99 per cent a year ago.
Don't bank on much of an improvement in the short term, particularly if the Office of Fair Trading wins the test case it is fighting over unauthorised overdraft charges, which would do substantial damage to the current account business model. We may even be close to the time when current account charges outweigh the value of any interest earned.
As Voltaire once said, “Ice cream is exquisite. What a pity it isn’t illegal”
- 1 Mother fed her daughter tapeworms to make her skinny for beauty pageant
- 2 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 3 Crystal Palace next manager latest: Palace consider Ally McCoist - EXCLUSIVE
- 4 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 5 Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'
'Alien thigh bone' on Mars: Excitement from alien hunters at 'evidence' of extraterrestrial life
West poised to join forces with Assad in face of Islamic State
Pamela Anderson rejects ice bucket challenge because of ALS experiments on animals: 'Mice had holes drilled into their skulls'
James Foley 'beheaded': Isis video shows militant with British accent 'execute US journalist' – as hunt begins for killer
ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Bin bag full of cats' heads discovered near Manchester's Curry Mile
Disgusting, frustrating, but intriguing: how the country really feels about its politicians
iJobs Money & Business
£20000 - £27000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...
£25000 - £35000 per annum: Harrington Starr: Service Desk Analyst - (Active Di...
£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...
£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...