[Steve]

Taken from The Times newspaper…

THE free banking enjoyed by tens of millions of people is under threat after a leading bank became the first to announce that it would charge for a current account.

First Direct, the online arm of HSBC, the UK’s largest bank, is to levy a £10 monthly fee on its current accounts. Only customers who deposit £1,500 a month or who maintain an average balance of £1,500 will escape the fee.

Financial commentators said that the move would herald a rush by other banks to do the same. NatWest and Lloyds TSB said last night that they had no plans to introduce fees to their current accounts, but refused to rule it out.

First Direct’s move will come as a blow to pensioners, women on maternity leave and others who have low or fluctuating incomes, who may struggle to meet the stringent requirements. A First Direct spokesman said that around 200,000 of its 1.3 million customers would have to shoulder the extra fee when it is introduced next February.

Which?, the consumer organisation, said that the charge would penalise those on lower incomes. “It is a shame that customers not in a position to keep £1,500 in their account at all times are being penalised,” a spokesman said.

Alan Duncan, Shadow Trade and Industry Secretary, said: “This is an irrational basis for charging. This is simply a tax on the lower-paid which will prevent access to bank accounts. I cannot see any way in which this is fair or justified.”

John McFall, Labour chairman of the Commons Treasury Select Committee, said the £1,500 figure was a high hurdle and did nothing for those who were financially excluded. There should be an honest debate about the concept of free banking, he said.
Several banks charge up to £15 a month for packaged or premium current accounts, which come with perks such as free travel insurance or cut-price currency exchange. But they also offer free current accounts.

First Direct’s announcement comes just weeks after the Office of Fair Trading said that it would investigate current account charges, prompting experts to predict an end to free banking.

Banks make nearly £5 billion a year from unauthorised overdraft charges. The OFT is investigating whether to cap these fees. Defaqto, a financial pro-ducts research business, said that any cap could signal an end to free current accounts as banks try to claw back the money they lose.

Customers will need to earn at least £24,000 a year before tax to meet First Direct’s minimum funding requirement of crediting £1,500 a month. But the bank says that people who earn less than this can have the fee waived by taking out another of its products, such as a credit card or mortgage.

Which? said: “This move will certainly alienate many thousands of customers unfairly targeted for choosing to have products with other providers who may be more competitive.”

First Direct charges between 15.9 per cent and 19.9 per cent interest on its credit cards. Other banks charge less: Intelligent Finance charges 8.9 per cent on its flatrate Visa, while Co-operative Bank charges 9.9 per cent on its Clear Visa card
.
David Black, head of banking at Defaqto, said: “First Direct has created a sort of halfway house of a fee-charging account and we are going to see a stream of similar accounts in the future. They are trying to corner the affluent end of the market.” HSBC, First Direct’s parent, said that it had no plans to follow the online bank’s example.

The OFT is expected to report early next year.

So who banks with First Direct and who thinks this is wrong and will have a ripple effect on the other banks?
Thoughts and coments?

[fionaB]

of course its wrong, the banks are trying to recoup some of their losses when they were made to drop their charges to a lower amount. once again its those with less money that are being made to pay the price! its no wonder that people dont want to try and better themselves as it gets taken off them the minute they do!
However to say they are stopping people having access to a bank account is wrong, as there is always the option of having a savings account. as long as they dont start charging on a savings account as well.

[Gary Bagshawe]

WAN ###S

[Foxesbrew]

Another Con trick. Save government costs by doing away with Pension Books then charge pensioners to draw their funds.The banks make more i suspect the exchequer will get more revenue.Those on low incomes will end up even worse off.

[emmettleffel]

No surprise really, first most of the credit cards put their interest rates up because the OFT said that late payments were too much (consequently now everyone pays extra interest ?????).

Now the OFT is looking at bank charges . (Oh no !)

Are the OFT working for our interest or the monetry systems.

I expect that most banks will get on the band wagon eventually.

[Rob Barron]

Originally Posted by fionaB

However to say they are stopping people having access to a bank account is wrong, as there is always the option of having a savings account. as long as they dont start charging on a savings account as well.

Not really Fi, as that is not comparing like with like. Savings accounts are entirely diffeent to current accounts and will not meet the needs of the people affected by this new charge. These people will be those who rely on having a cheque book, a cheque guarantee card and direct debit or standing order facilities.

Whilst there are SOME savings accounts that can set up DDs and SOs, most do not. Also the cheque book you can get with some savings accounts is virtually worthless for everyday spending as it does not have a cheque guarantee card. So they are restricted to using the cheque book for things like making gifts of money to friends like on birthdays, paying a few utility bills, and so forth.

I do not keep a current account because I don't particularly need one. I just have a standard savings account that can use DDs and SOs and another for my savings which pays a reasonable rate of interest. I almost never need to use cheques but that is only me, a lot of others do still need them and use them so a current account is the only way they can work and will now have to pay a fee of £120 a year which is absolutely scandalous, especially when the biggest banks are already making 10-figure sums profit each year.

There is another side to the argument of course, there always is. Why do we believe we have the right to free bank facilities anyway? I mean, because of the way my accounts work, I never give my bank a penny in charges and things but they give me electronic cards and things that they have to pay for. If someone has a current account, they get a cheque book specially printed for them, a cheque guarantee card with their personal details on, monthly statements, cash withdrawal facilities and maybe even a small amount of interest (very small!) but they get it all free. The banks can say they have the right to charge for these things and it is hard on a business level to deny them that.

We know on a moral level that it is the relatively less well off in society that will be hit by these charges... isn't it always the way! The same thing happens with the grossly unfair council tax that we all have to pay. Those in low income groups pay about 5% of their income in council tax whereas the well-off section of society pays an average of 1.7% of their income: three times less!

The rich get richer and the poor get messed on at every turn. Will society in our so-called modern, civilised times, ever change and treat the poor with the dignity, respect and fairness they deserve?

Don't hold your breath!

Cheers,
Rob

[Dave]

Well I'm with FD, so will be transferring elsewhere out of principal .....money grabbing *****'s

[Steve]

Originally Posted by Rob Barron

There is another side to the argument of course, there always is. Why do we believe we have the right to free bank facilities anyway? I mean, because of the way my accounts work, I never give my bank a penny in charges and things but they give me electronic cards and things that they have to pay for. If someone has a current account, they get a cheque book specially printed for them, a cheque guarantee card with their personal details on, monthly statements, cash withdrawal facilities and maybe even a small amount of interest (very small!) but they get it all free. The banks can say they have the right to charge for these things and it is hard on a business level to deny them that.

What about the money they make on our money or the charges thay take from us for providing overdrafts, loans etc?

[fionaB]

I dont have a current account, i dont have a cheque book, i dont have a switch card, but i do have a normal saving account that my wages get paid into and all my standing orders and direct debits get paid from. i have no ned of another bank account lol no savings. And although i do see your point of things having to be paid for Rob, the bank makes its money from the money that we pay into our accounts by using it for investments and loans etc, its OUR money that the bank is using not its own, so WE are paying for everything in the first place.well other folk are as i dont have anything in the bank and my money aint in the bank long enough for them to use it on anything. i think people forget that you dont actually have any money in the bank, all you have is a figure on paper UNTIl the time u want to withdraw it! your wages and savings arent sitting there idly waiting for you to withdraw them, as soon as the money is in the bank will use it on something.

Fiona

[Rob Barron]

Oh absolutely Fiona, the banks invest huge sums of money and make huge amounts in profits. I only meant that there is an argument that says we have no right to insist that we have a right to free banking.

I don't agree with that argument, I was just trying to keep my comments balanced by putting the other side of the coin... tarnished as that coin may well be :o)

Cheers,
Rob

[Bella]

Wow you guys still have free Banking
Here in Australia we pay account fees on all account types (thats all banks), except children's saving accounts.

[fionaB]

ahh right getcha now ROb... playing devils advocate

[Matt F]

Banks aren't charities and aren't obliged to provide a public service. They are a business and are there to make money. Therefore, if they have accounts that operate at a loss then they have every right to either close them or make them profitable (by levying a charge).

There's been a hell of a lot of moaning about this - probably because people in the UK (unlike most other countries) have enjoyed free banking for years. What's particulaly amusing is this blaming of the OFT (by some) for making banks reduce the fees they charge on overdrafts/late credit card payments - in other words people are happy if their free banking is paid for by excessive charges made against those who get into financial difficulty.

Anyway, those affected should stop bleating and move their accounts (if they wish) but don't be surprised if the rest of the banks follow FD's lead.

Matt.