Which? report claims free banking is a myth

| August 21, 2012 | 0 Comments
Which? report claims free banking is a myth

A new report by consumer group Which? highlights the high charges that can be applied to ‘free’ current accounts.

While these accounts are free while in credit, charges can be applied if a customer goes overdrawn, especially if they do so without permission.

Customers can also be charged for overseas transactions and for agreed overdrafts.

The interest on agreed overdrafts can be as high as 19.9 per cent for RBS, Natwest and HSBC customers, a higher rate than is charged on many credit cards and loans.

The Current Account Plus account offered by the Yorkshire/Clydesdale Bank, charges up to £75 a month if customers go overdrawn without permission for two days in a row.

This can add up to £900 a year, the consumer group warns, claiming
it “shatters the myth” of free banking.

However the report has been criticised as “disingenuous” by the British Bankers’ Association, which said that customers can access cash and carry out most types of transactions in the UK without incurring a charge.

The organisation argues that customers should expect to pay charges for borrowing money on an overdraft and overseas charges are likely to be beyond a bank’s control.

Which? is calling for overdraft charges to be simplified.

High-profile members of the banking industry have suggested that free banking contributed to the recent scandals which have rocked the banking industry, including the mis-selling of payment protection insurance (PPI).

Santander is expected to raise the issue at a parliamentary inquiry into the recent Libor scandal and to make a case for the introduction of fees on current accounts.

Britain is the only country in Europe to offer ‘free-in-credit’ current accounts and it is claimed that lenders offset the cost of this banking model through ‘stealth charges’ on overdrafts and the cross-selling of other products such as PPI which generate high levels of profit.

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