Romance is dead with First Direct

Romance may be in the air this week but thousands of First Direct customers will be falling out of love with their bank.

For February is the first month in which tens of thousands of customers will have to pay a £10 fee to stay with the telephone and online bank.

Unless they deposit a monthly net salary of at least £1,500 (which means earning around £26,000 a year) in their account or maintain an average balance equal to this sum during the month, the new fee will apply and be deducted from their balance in March.

If you earn less than this, you can still avoid the fee by taking out another of First Direct's products, such as home insurance, a credit card or a personal loan.

The charge could affect as many as 195,000 customers - some 15 per cent of First Direct's 1.3 million current account holders.

After the bank first announced its intention to levy fees in November, it admitted many customers had decided to close their accounts in protest. A spokesman couldn't reveal how many had done so, but said it was "fewer than anticipated".

First Direct was the first major bank to levy a monthly fee, and it's expected at least one other will follow suit this year.

The move comes ahead of an expected clampdown by the Office of Fair Trading on penalty charges on current accounts.

After last year's success in halving the penalty fees for missed or late payments on credit cards, it is anticipated that an OFT investigation taking place at the moment will result in banks being forced to slash fees of up to £39 for unauthorised overdrafts.

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Meanwhile, any First Direct current account holder who doesn't want to pay the monthly fee and is looking to switch can at least benefit from a ferociously competitive UK market.

In a drive for particular types of custom, many banks offer either generous returns on balances in credit - the Halifax's high-interest current account pays 6 per cent as long as you deposit at least £1,000 a month - or low-interest overdraft rates. For example, Nationwide's FlexAccount charges just 7.75 per cent on an agreed overdraft.

If you have an ordinary bank account with one of the big four high-street banks - Barclays, Lloyds TSB, NatWest or HSBC - you still can't expect more than 0.1 per cent interest on balances in credit. In their defence, banks argue that large sums - and better rates - belong in savings accounts instead. But the availability of better rates at rival banks means there's no excuse for accepting this.