Consumer group demands banks be more transparent about charges as it warns credit and debit customers both lose out
The consumer group Which? has warned that some bank customers are paying up to £900 a year in charges while others miss out on hundreds of pounds in lost interest.
The group said it had uncovered huge variations in the cost of “free” current accounts between banks which shattered the myth that Britons enjoy “free” banking. Charges for going overdrawn for two days a month without permission range from £120 on Halifax’s reward current account to £900 a year on the Yorkshire/Clydesdale Bank current account plus.
Even customers with authorised overdrafts will rack up significant charges, with many banks – including RBS/Natwest and HSBC – charging an APR of 19.9%, higher than that charged by some credit card providers, Which? warned.
The findings come as banks suggest the way to avoid future industry scandals is to charge for current accounts, and a senior executive at the Financial Services Authority said regulatory intervention might be needed to instruct banks to charge for current accounts.
Earlier this month Sir David Walker, the newly appointed chairman of Barclays, indicated his support for the idea of paying for current accounts. Echoing the FSA Walker said that “in principle” he agreed customers should pay as it might prevent future mis-selling of financial products.
Which? chief executive Peter Vicary-Smith said: “The suggestion that banks should increase charges to avoid more scandals defies logic and is a slap in the face for consumers who are being hit hard by one of the worst financial crises in recent times.
“It’s a disgrace that the very people who bailed out the banks are being asked to pay more for the most basic accounts, while the industry continues to be rocked by scandals like PPI mis-selling, Libor rate-rigging and IT failures.
“Banks must be far more transparent about their fees and charges so people can clearly see what they already pay.”
The research by Which? shows it is not just those in the red who are losing out. Consumers who stay in credit are also being hit through lost interest and hefty fees for withdrawing and spending cash abroad.
NatWest Select and Lloyds TSB Classic account customers who stay in credit with an average balance of £1,500, for example, lose out on £63 a year against what they would earn in a best-buy savings account.
Which? called on the banks to provide information so people can clearly see how much they pay for their accounts and are able to make easy comparisons between rival banks. It has called for the introduction of portable account numbers to make switching banks accounts as easy as changing mobile phone provider.
However, a spokesman for the British Bankers’ Association said Which? was being “disingenuous” by equating the costs of certain specific services to the costs of a current account.
“Customers generally pay nothing for current accounts which allow them to access their cash 24/7 from free ATMs, online or by phone; pay bills and make payments by direct debit, standing order, electronic and telephone transfer; and to receive benefits, salaries and other payments,” he said.
“The costs used by Which? in its press release are for borrowing money – a service for which everyone would expect to pay. Charges can be avoided completely simply by not going overdrawn, and most customers still enjoy free banking.”