Banks face revolt if fees introduced for current accounts
The end of free banking would trigger customer fury
British banks risk a customer revolt if monthly fees are introduced for current accounts. Three out of four people say they are likely or very likely to ditch their bank if charges are introduced.
Fears that free banking could end were hiked this month when Nikhil Rathi, chief executive of the Financial Conduct Authority, said the regulator would not “stand in the way” if business models change.
Traditional banks have closed thousands of branches and face new competition from online rivals. But the research for the Centre for Social Justice suggests banks bosses will face an angry backlash if customers who stay in credit are hit with fees.
Opposition to fees is even higher among those on low incomes. Four out five who bring in less £15,000 said they would switch banks to avoid new charges.
Matthew Greenwood, head of debt at the influential think tank, said: “This poll reveals the huge disruption the removal of free banking would have on people, particularly those who can least afford the fees.
“The regulator’s consent for banks to take this alarming step shows alarming disregard for these customers and will erode their choice and ability to secure the banking services most of us take for granted. We are already seeing the pernicious impact of the so-called poverty premium, where the poorest are having to pay more than the richest for basic services – this step will only make this worse.”
The CSJ fears such a move would “deepen the woes of already cash-strapped consumers”.
The Financial Conduct Authority argues that free banking for standard accounts is a "market and commercial decision, not a regulatory requirement".
However, major banks remain required to offer free accounts for people who do not qualify for standard services - often because they have a poor credit history. These "basic" accounts do not come with a chequebook or overdraft services.
A spokesperson for UK Finance, which represents the banking industry, said: “There is a wide range of different current accounts available and a competitive switching market. Some accounts have a monthly fee as is more common in other countries, but most current accounts in the UK do not have any sort of monthly fee.
“A number of major banks have publicly stated they have no plans to charge monthly fees.
“Alongside this, the nine largest personal current account providers are required to offer basic bank accounts that are fee-free –
"HM Treasury’s most recent statistics show that over seven million of these have been opened.” Major names in banking stress that they continue to offer free services.
Santander offers a free “Everyday Current Account” alongside an “Edge-Up” account. For a £5 monthly fee, this allows customers to earn cashback on spending and interest on their in-credit balances.
Likewise, Barclays offers free standard accounts as well as paid-for options.
A Nationwide spokeswoman said: “Nationwide has no plans to introduce charges to use its current accounts. Nationwide’s FlexPlus packaged current account comes with a monthly fee relating to all of the benefits that come with the account.”
An HSBC spokesman said: “We do not currently charge fees for operating a current account and have no plans to do so.
An HSBC spokesman said: “We do not currently charge fees for operating a current account and have no plans to do so.