Should banks axe our free accounts? Our experts argue
Jeff Prestridge Personal Finance Editor
Like a dish of battered fish, chips and mushy peas, free banking for those who stay in credit is an integral part of this country’s DNA. It’s a financial right that should not be taken away from us – not now, not in the near future, not ever. So when HSBC indicated last week that it is considering doing away with free current account banking services, I baulked at the prospect as I am sure many readers will have done.
Yet again, just when we need our banking industry to do the right thing, they think about doing the exact opposite. That is, profits first, customers a long way behind. Inexcusable. Unacceptable.
We’ve seen examples of unfriendly banking behaviour many times before, so we shouldn’t be surprised. After all, it was the banks that triggered the 2008 financial crisis and brought the country to its knees – and then treated some of their business customers in its ruinous aftermath quite despicably.
And it was the banks that sold worthless payment protection insurance by the bucket-load without a hint of apology. More recently, they’ve taken a scythe to both their branch and cash machine networks, even if it’s meant leaving entire communities bankless. No consideration for ‘community’ – the fabric of our society. Just ruthless, destructive cost cutting. Scandalously, the regulator and the Government have watched all this from the sidelines without batting an eyelid.
While HSBC’s threats may come to nothing – after all, the end of free banking has been a recurring personal finance threat for many years – it seems we are edging ever closer to a banking market where fee-charging accounts are the norm and free accounts the exception. It will only take one of the big banks to introduce fees on all its current accounts for their rivals to follow suit lemming-like.
Of course, the pandemic has given the banks the perfect excuse. Low interest rates have already eaten into their profits – Lloyds excepted – and it is likely profits will come under even more pressure in the months ahead as unemployment rises, businesses fail and customers are unable to meet their loan repayments. The search for replacement revenue will inevitably point the dial in the direction of current account fees.
If they go down this route, it is bound to cause a customer revolt. Whenever I have written about the possible ending of free banking, the response from readers has been one of outrage. They argue, quite rightly, that ‘free’ banking is a reward for thrift over extravagance – in other words, for running their bank account in a sensible way.
The quid pro quo is that in exchange for getting free banking, they earn no interest on the money tucked away in their account. It’s a deal customers understand and are comfortable with. Fairer, they say, than fee-charging ‘reward’ accounts where the rewards – free travel insurance, free mobile phone insurance – aren’t always as attractive as they appear in the marketing brochures.
Yes, you can argue that the ‘free’ current account market unfairly discriminates against those who temporarily go overdrawn – with punitive interest rates of 40 per cent-plus (free £500 overdrafts, a response to the pandemic, were withdrawn yesterday). But if the City regulator had done its job properly last year when it reviewed overdraft charges with a view to introducing a ‘fairer’ regime, onerous interest charges would not now be an issue.
Baroness Altmann has earned a reputation over the years for being a consumer champion. In the early 2000s, alongside The Mail on Sunday, she fought for justice for workers who lost a big slice of their pension when their employer went bust, leaving in a place an underfunded pension scheme unable to meet all its promises. Last week, she said…
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