Concern At New Current Account Charges
A consumer group has voiced its concern about the fees and charges attached to a new breed of current account.
Some banks use cash bonuses to entice customers to sign up, but overdraft charges can be as expensive as £5 a day.
Which? said it believed banks were planning to end free banking if they lost their landmark battle over charges with the Office of Fair Trading (OFT).
The British Bankers Association said the accounts were simply the product of a competitive marketplace.
Earlier this month, Halifax Bank of Scotland launched its Reward Current Account, which offers a monthly cash bonus of £5 if £1,000 is paid in during the month.
However, if a customer goes overdrawn, even with a prior agreement, it will cost them £5 a day for an unauthorised overdraft.
A similar current account from the Alliance and Leicester is offering new customers a £100 bonus just for signing up.
Again, the unauthorised overdraft costs £5 daily.
Also becoming more common are so-called packaged deals.
Two have been launched by the Abbey, offering discounts and free insurance in return for a flat fee of £15 a month.
An Abbey spokesman said: “There is no connection whatsoever between us launching packaged accounts and the end of free banking.”
Referring to the two accounts that charge a fee, he said: “Added value accounts such as these can be great value – but only when customers actually use the benefits.
“Our accounts have been designed so that the benefits are relevant to the needs and lifestyles of our customers and they can maximise the value they get from their account.”
Phil Jones, head of money research at consumer group Which?, said a new trend was developing while the OFT inquiry into the legality of bank charges rumbled on.
“Well it seems like a bit of a coincidence that while this court case is going on – and it looks like the banks are going to lose and have to repay consumers what they’ve unfairly charged them – that they are actually introducing a whole range of accounts with different charging structures.”
But the British Bankers Association dismissed this claim as nonsense, saying accounts like these aimed to attract customers in a competitive marketplace.
Brian Capon, assistant director of the BBA, said cash bonuses were simply part of a bank’s attempts to gain an advantage.
“With the interest rates we’ve got at the moment, which are quite flat, the banks are looking to get A competitive edge… so really it’s to have that little bit of something [extra], that unique selling point.”
Some MPs however say it is a worrying development on the part of the banks and are urging them to spell out the true cost of these deals when selling them.
“If there is the slightest doubt on transparency, then they are laying themselves open to charges that these costs are hidden,” said John McFall, chairman of the Commons treasury select committee.
“The lesson for the banks, after the debacle of recent years, is that they cannot get away with hidden charges… so let them be transparent, let them be open and honest with consumers about what they are letting themselves into.”
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