21 Nov 2024

The beginning of the end of free banking

Speculation is rife that in tomorrow’s Budget, the Chancellor, Alistair Darling will announce that all UK citizens must be offered a basic bank account from UK banks if they want one.

Currently, basic bank accounts are available to the majority of customers, with only a few being declined in exceptional circumstances, including having a previous bankruptcy judgement against them.

Michelle Slade, spokesperson for Moneyfacts.co.uk commented:

“Basic bank accounts were originally set up with the aim of giving banking facilities to all, but banks still had the final say.

“Basic bank accounts appeal to customers who are worried about overspending, as they do not allow you to go overdrawn.

“You can only spend the balance of your account; however, you still need to keep an eye on your funds to cover any standing orders or direct debits. If there is not enough money in your account to pay these, they will be rejected and you will be charged.

“Without banking facilities and the ability to pay by direct debit, many customers find themselves having to pay a higher price for the same amenities, such as their utility bills.

“By making it a legal right to have banking facilities, the less well off customers will get a fairer deal.

“Banks will inevitably face higher costs if this legislation is passed, with the cost recovered through standard banking customers.

“The change could be another nail in the coffin for free banking, with banks looking to regain the additional cost potentially through the introduction of monthly fees.

“Virgin Money has already stated that when it launches a current account, it will look to charge a monthly fee, albeit with the overdraft charges included within it. This may open the flood gates for other providers to follow suit.

“Already, the number of fee paying accounts has more than doubled in the last five years and this is only going to increase further.

“While the heart of this initiative is in the right place, in practical terms it may cause more expense for the majority of customers further down the line.”

Appendix

Provider	Account	Rate at £1	Standing Orders	Direct Debits	Account Operation
Alliance & Leicester	Basic Cash Account	-	No	Yes	Post Office, WAP, Postal, Branch, Internet,
Barclays Bank	Cash Card	-	Yes	Yes	Post Office, Branch,
Clydesdale Bank	Readycash	-	Yes	Yes	Post Office, Branch, Internet, Telephone,
Coventry BS	BranchSaveMoneyManager	0.1	Yes	Yes	Branch,
Coventry BS	CallSaveMoneyManager	0.15	Yes	Yes	Internet, Telephone,
HSBC	Basic Bank Account	-	Yes	Yes	Post Office, Postal, Branch, Internet, Telephone,
Halifax	Easycash	-	Yes	Yes	Post Office, Postal, Branch, Internet, Telephone,
Lloyds TSB	Cash Account	-	Yes	Yes	Post Office, Postal, Branch, Internet, Telephone,
Nationwide BS	Cash Card	-	Yes	Yes	Post Office, WAP, Postal, Branch, Internet, Telephone,
NatWest	Step	0.1	Yes	Yes	Post Office, Postal, Branch, Internet, Telephone,
Norwich & Peterborough BS	Basic Banking	-	Yes	Yes	Postal, Branch, Internet, Telephone,
Royal Bank of Scotland	Key	0.1	Yes	Yes	Post Office, Postal, Branch, Internet, Telephone,
Royal Bank of Scotland	Cash Account	0.1	No	No	Post Office, Postal, Branch, Internet, Telephone,
Santander	Basic Account	-	Yes	Yes	Post Office, Branch, Internet, Telephone,
The Co-operative Bank	Cashminder	-	Yes	Yes	Post Office, Postal, Branch, Internet, Telephone,
Yorkshire Bank	Readycash	-	Yes	Yes	Post Office, Branch, Internet, Telephone,
Source: Moneyfacts.co.uk 23.3.10

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.

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