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Another blow for free banking
Ali Hussain
TENS of thousands of NatWest customers who regularly exceed their agreed overdraft limit are being offered the chance to pay a monthly account fee of £10 in return for a reduction in overdraft charges.
The move is seen as another blow to the concept of free banking, where there are no upfront account fees.
At present, a NatWest current-account customer who strays into an unarranged overdraft is charged between £28 and £38. From September a saver who agrees to pay the £10 monthly fee will be charged £17. The charges are on top of interest charged at 29.69% on unauthorised borrowing.
Gordon Pell, chief executive of retail markets at NatWest, said: “For those who do frequently use unauthorised borrowing our new deal could enable them to budget better. However, there is no compulsion to adopt the offer.”
Pell estimates that 100,000 NatWest customers would pay less in charges under the new scheme. The bank said that customers would be able to opt in and out.
The move came as First Direct, the telephone and internet bank owned by HSBC, said it had lost only 1.7% of its customers since introducing a monthly fee in February.
It charges £10 on its standard current account if customers do not pay in at least £1,500 a month. It said it had lost 20,000 customers since the change in February.
NatWest’s move is seen as a reaction to the growing consumer discontent over sky-high bank charges.
Consumer groups such as Which? have encouraged bank customers to demand refunds of overdraft fees because they regard them as illegal penalty charges.
Credit Suisse estimates that banks and building societies make £1.2 billion in profits from overdraft charges every year.
Some savers have taken their compensation battle to court so banks will be forced to reveal exactly what it costs them to process an unauthorised overdraft or a bounced cheque. But no case has yet progressed this far.
Many cases have been stopped as the banks, keen to keep a lid on the true costs, have settled out of court.
The Office of Fair Trading is investigating and is expected to make a judgment by the end of the year.
Consumer groups warn, however, that the growing pressure on banks to cut penalty charges may result in more banks introducing monthly fees for all customers.
Stuart Glendinning of Moneysupermarket, a price-comparison site, said: “Banks are trying to end free banking by stealth.”
Ali Hussain
TENS of thousands of NatWest customers who regularly exceed their agreed overdraft limit are being offered the chance to pay a monthly account fee of £10 in return for a reduction in overdraft charges.
The move is seen as another blow to the concept of free banking, where there are no upfront account fees.
At present, a NatWest current-account customer who strays into an unarranged overdraft is charged between £28 and £38. From September a saver who agrees to pay the £10 monthly fee will be charged £17. The charges are on top of interest charged at 29.69% on unauthorised borrowing.
Gordon Pell, chief executive of retail markets at NatWest, said: “For those who do frequently use unauthorised borrowing our new deal could enable them to budget better. However, there is no compulsion to adopt the offer.”
Pell estimates that 100,000 NatWest customers would pay less in charges under the new scheme. The bank said that customers would be able to opt in and out.
The move came as First Direct, the telephone and internet bank owned by HSBC, said it had lost only 1.7% of its customers since introducing a monthly fee in February.
It charges £10 on its standard current account if customers do not pay in at least £1,500 a month. It said it had lost 20,000 customers since the change in February.
NatWest’s move is seen as a reaction to the growing consumer discontent over sky-high bank charges.
Consumer groups such as Which? have encouraged bank customers to demand refunds of overdraft fees because they regard them as illegal penalty charges.
Credit Suisse estimates that banks and building societies make £1.2 billion in profits from overdraft charges every year.
Some savers have taken their compensation battle to court so banks will be forced to reveal exactly what it costs them to process an unauthorised overdraft or a bounced cheque. But no case has yet progressed this far.
Many cases have been stopped as the banks, keen to keep a lid on the true costs, have settled out of court.
The Office of Fair Trading is investigating and is expected to make a judgment by the end of the year.
Consumer groups warn, however, that the growing pressure on banks to cut penalty charges may result in more banks introducing monthly fees for all customers.
Stuart Glendinning of Moneysupermarket, a price-comparison site, said: “Banks are trying to end free banking by stealth.”
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