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Banks Rapped On Current Accounts
A key watchdog has slammed banks for failing customers who do not understand the interest on their current accounts and miss out on a significant portion of the money generated.
OFT says over 75% of customers don't know how much interest they should earn
An Office of Fair Trading report on personal accounts found that there was a lack of transparency in the way banks operated and that competition was not working in the market.
The study found that banks make £8.3bn from personal accounts - more than they reap from credit cards and savings accounts put together - but that 81% of this income is made "opaquely".
It revealed that £2.6bn came from overdraft charges while a further £4.1bn was "net credit interest income" - the profit made after banks have paid customers their interest.
The watchdog also found that more than three quarters of consumers did not know how much interest they should earn on their accounts.
It said this lack of understanding accounted for the low rate at which Britons switch banks.
Only 6% of consumers have changed banks in the last year - one of the lowest rates in Europe.
OFT chief executive John Fingleton said: "Personal current accounts are a vital gateway to effective participation in the economy.
"But this market is not serving consumers well."
He went on: "Customers lack the information they need to choose the best deal, and this in turn weakens the banks' incentives to compete.
"There is much the banks could do to improve how the market works, and we hope this report will encourage them to take steps to do so in the near future."
http://news.sky.com/skynews/Home/Bus...or%2BConsumers
A key watchdog has slammed banks for failing customers who do not understand the interest on their current accounts and miss out on a significant portion of the money generated.
OFT says over 75% of customers don't know how much interest they should earn An Office of Fair Trading report on personal accounts found that there was a lack of transparency in the way banks operated and that competition was not working in the market.
The study found that banks make £8.3bn from personal accounts - more than they reap from credit cards and savings accounts put together - but that 81% of this income is made "opaquely".
It revealed that £2.6bn came from overdraft charges while a further £4.1bn was "net credit interest income" - the profit made after banks have paid customers their interest.
The watchdog also found that more than three quarters of consumers did not know how much interest they should earn on their accounts.
It said this lack of understanding accounted for the low rate at which Britons switch banks.
Only 6% of consumers have changed banks in the last year - one of the lowest rates in Europe.
OFT chief executive John Fingleton said: "Personal current accounts are a vital gateway to effective participation in the economy.
"But this market is not serving consumers well."
He went on: "Customers lack the information they need to choose the best deal, and this in turn weakens the banks' incentives to compete.
"There is much the banks could do to improve how the market works, and we hope this report will encourage them to take steps to do so in the near future."
http://news.sky.com/skynews/Home/Bus...or%2BConsumers
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