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Which? have published a report 'No Such Thing As Free Banking'. http://www.which.co.uk/documents/pdf...nts-223443.pdf
Below is the accompanying press release and further below a response from the British Bankers Association.
No such thing as a free bank, says Which?
16 August 2010
According to the experts at Which?, low credit interest, high overdraft charges and big fees on spending abroad means that while we may not pay a monthly sum for our current accounts, banking is not free.
The consumer champion’s new research reveals that consumers could be spending as much as £1,140 a year on unauthorised overdraft charges if they bank with Santander*.
Disparity around charges doesn’t end there. While First Trust charges customers £185 a year for using a £200 authorised overdraft six days a month, Lloyds TSB customers only pay £7**. Furthermore, each bank has very different ways of charging for overdrafts, making it difficult for consumers to compare accounts.
Even customers who stay out of the red are not getting a free ride from the banks. Which? found that lost interest and fees for using their card abroad could be costing consumers as much as £57 a year***– and much more for those who travel overseas regularly.
Which? chief executive, Peter Vicary-Smith, says:
“Contrary to popular belief, banking is not free. Whether it’s through low interest rates or high charges, we all end up paying for our current account in the end. “The complicated ways banks present charges makes it difficult for people to work out whether they’re getting a good deal. If you regularly go into the red or want a better return on your money, then the figures speak for themselves – it’s worth making the switch to a more suitable account.”
Notes to Editor
The full article ‘No such thing as free banking’ appears in the September 2010 issue of Which? magazine. For further information, a copy of the article or an interview with money editor, James Daley, please contact Miranda Akhurst.
* In our scenario a customer goes overdrawn due to two direct debits, which are both paid by the bank. Santander Bank Account charges customers £35 per paid item and a £25 monthly unarranged overdraft fee. This equates to £95 in a month (£1,140 a year if repeated over 12 months) for using an unauthorised overdraft in this way.
** Holders of Coventry BS’s First account are not charged for a £250 authorised overdraft, whereas an overdraft on the First Trust Classic Account costs £185.
*** Which? looked at the typical cost of a current account for customers who have an average balance of £1,500, and who make one short trip overseas each year.
So what about free banking?
16/08/2010 BBA
BC writes: Consumer body Which has issued a press release (No such thing as a free bank, says Which) stating that "low credit interest, high overdraft charges and big fees on spending abroad" means that while we may not pay a monthly sum for our current accounts, banking in the UK is not free.
Though it is couched in familiar anti-bank language, the release is largely a re-statement of Which's long-held and uncontroversial view. In the UK it is perfectly possible for a customer to use a bank without incurring any additional charges.
It is cheaper to bank in the UK than in virtually any other country, where paying for every single item, including a statement and a withdrawal at a cash machine - is normal.
In the UK, banking is free for people in credit - and that's about 80 per cent of the population. And for that you get direct debits, standing orders, cash from any Link ATM - even when it's not your bank's - phone and internet banking and many other services. If you need short term credit the rates are reasonable. Saving rates reflect the current economic conditions.
If customers use cards abroad they quite reasonably would expect to pay for the currency conversion and commission as the banks where the cards are used charge the banks in the UK.
And we are in absolute agreement with Which on their conclusion: that it's important to choose the right account for your own needs. A current account is intended as a payment vehicle, where your salary goes in and you make payments until the next one is received. If you need to go overdrawn, it will be cheaper if you arrange it with your bank first. If you want to save then there are many accounts that offer competitive rates.
Below is the accompanying press release and further below a response from the British Bankers Association.
No such thing as a free bank, says Which?
16 August 2010
According to the experts at Which?, low credit interest, high overdraft charges and big fees on spending abroad means that while we may not pay a monthly sum for our current accounts, banking is not free.
The consumer champion’s new research reveals that consumers could be spending as much as £1,140 a year on unauthorised overdraft charges if they bank with Santander*.
Disparity around charges doesn’t end there. While First Trust charges customers £185 a year for using a £200 authorised overdraft six days a month, Lloyds TSB customers only pay £7**. Furthermore, each bank has very different ways of charging for overdrafts, making it difficult for consumers to compare accounts.
Even customers who stay out of the red are not getting a free ride from the banks. Which? found that lost interest and fees for using their card abroad could be costing consumers as much as £57 a year***– and much more for those who travel overseas regularly.
Which? chief executive, Peter Vicary-Smith, says:
“Contrary to popular belief, banking is not free. Whether it’s through low interest rates or high charges, we all end up paying for our current account in the end. “The complicated ways banks present charges makes it difficult for people to work out whether they’re getting a good deal. If you regularly go into the red or want a better return on your money, then the figures speak for themselves – it’s worth making the switch to a more suitable account.”
Notes to Editor
The full article ‘No such thing as free banking’ appears in the September 2010 issue of Which? magazine. For further information, a copy of the article or an interview with money editor, James Daley, please contact Miranda Akhurst.
* In our scenario a customer goes overdrawn due to two direct debits, which are both paid by the bank. Santander Bank Account charges customers £35 per paid item and a £25 monthly unarranged overdraft fee. This equates to £95 in a month (£1,140 a year if repeated over 12 months) for using an unauthorised overdraft in this way.
** Holders of Coventry BS’s First account are not charged for a £250 authorised overdraft, whereas an overdraft on the First Trust Classic Account costs £185.
*** Which? looked at the typical cost of a current account for customers who have an average balance of £1,500, and who make one short trip overseas each year.
************************************************** ********
So what about free banking?
16/08/2010 BBA
BC writes: Consumer body Which has issued a press release (No such thing as a free bank, says Which) stating that "low credit interest, high overdraft charges and big fees on spending abroad" means that while we may not pay a monthly sum for our current accounts, banking in the UK is not free.
Though it is couched in familiar anti-bank language, the release is largely a re-statement of Which's long-held and uncontroversial view. In the UK it is perfectly possible for a customer to use a bank without incurring any additional charges.
It is cheaper to bank in the UK than in virtually any other country, where paying for every single item, including a statement and a withdrawal at a cash machine - is normal.
In the UK, banking is free for people in credit - and that's about 80 per cent of the population. And for that you get direct debits, standing orders, cash from any Link ATM - even when it's not your bank's - phone and internet banking and many other services. If you need short term credit the rates are reasonable. Saving rates reflect the current economic conditions.
If customers use cards abroad they quite reasonably would expect to pay for the currency conversion and commission as the banks where the cards are used charge the banks in the UK.
And we are in absolute agreement with Which on their conclusion: that it's important to choose the right account for your own needs. A current account is intended as a payment vehicle, where your salary goes in and you make payments until the next one is received. If you need to go overdrawn, it will be cheaper if you arrange it with your bank first. If you want to save then there are many accounts that offer competitive rates.
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