Should free banking be a right? - Banking - News - Moneyfacts


Should free banking be a right?

Should free banking be a right?

Category: Banking

Updated: 01/05/2014
First Published: 15/06/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Free banking is something we take for granted in this country.

As opposed to some countries, where you have to pay for a basic bank account; in the UK most banks and building societies offer a fee-free account.

Of course, accounts will make charges if you go beyond an authorised overdraft or a direct debit bounces. But the majority of us accept that a charge should be made even if we might disagree over how much banks charge.

However, something we do not accept is that we should have to pay a monthly or annual fee, just for having access to a bank account.

Should free banking be a right?

In a poll we took last month, we asked our email subscribers whether we have the right to free banking services.

Should free banking be a right? 89% said yes, 11% said no

The response was pretty emphatic, with 89% of those answering believing that yes, we should have access to "free" banking services.

The poll was taken after Andrew Bailey, the man who is set to take over as head regulator of financial services in the UK, said that free banking was "a dangerous myth".

As well as voting, respondents weren't backwards in coming forwards when commenting about free banking…

"The bank has access to my money when I am in credit - and does not pay me any interest for this facility. I consider that to be my payment to them."

"I think it is very dangerous when a regulator interferes with the market in this way and issues political statements. Whether banking is free or not is a marketing issue for the banks."

More Moneyfacts customer comments at the bottom of this article.

If you missed the poll, it's still open: have your say.

Will free bank accounts disappear?

It would be very difficult for every bank in the UK to group together and withdraw free banking services. With the negative publicity the banks have been receiving since the financial crisis, it's hard to see them having the stomach to make the change.

However, what may happen is a regulatory change that forces banks to charge a fee proportionate to the benefits and services the bank account provides.

Such a move would undoubtedly prove very unpopular with customers, as our poll shows.

But the argument goes that free banking makes it difficult for banks to make a profit on accounts, and encourages them to look at other ways to make bank accounts pay (such as making higher charges for going overdrawn).

Of course, most banks also offer a paid for option, often with extra benefits such as travel insurance or breakdown cover to convince us that what we are paying for is "worth it".

But while we may as customers value extra benefits such as these, the concept of paying for banking services appears, at least from our poll, to be one that we simply don't accept.

Comments (20)

Here's what readers have said. Why not have your say, or debate this issue live on our Q & A facility.

The comments below have not been moderated.

"Yes, I know it's not really free anyway but I do not want the bank using my money and then charging me for it."

"Yes, banks are paying dismal amounts of interest on deposits at present; to expect us to pay to use our own money is laughable."

"No, it shouldn't be a 'right' but like in any business charging the customer may not work out in their favour. For example, we may choose not to pay by direct debit if there were a charge and as a result may be more inclined to move away from those companies where direct debit payments are normally involved - somewhat impulsively and at short notice - so there would be repercussions there also. Not all companies give added benefits, i.e. discounts, for paying by direct debit; my local swimming pool charges an additional £20 p.a. or so for paying by direct debit!"

"Yes, if managed well, the availability of 'free' banking as it stands is an essential to customer satisfaction. Any further charging system would only enhance bank profit to the detriment of customers."

"Yes, when you are in credit, when the bank can get interest on your money."

"Yes, provided that one stays in credit and the banks do not pay any interest on current accounts then yes free banking should prevail. One additional point, if banking charges for current accounts are introduced, they should apply only to branch based accounts where the overheads might justify such charges. Online banking is much less costly to the banks and should certainly remain free, with charges only for over-the-counter transactions."

"Yes, if we want extras through the bank, yes, charge. Not for normal day to day banking."

"Yes, perhaps not an absolute right - but free banking should be an option for those of us who are careful not to go overdrawn (or exceed an agreed limit) and are not drawn into buying unwanted products with "hidden" costs. Why should we pay for those who do not manage their affairs properly? They must look out for themselves and not be 'nannied'. Better to get people educated in how to manage their banking relationships properly themselves."

"Yes, with banks paying little or no interest at all on most current and instant access savings accounts, and making a tonne from credit card borrowers.
It's the least they could give back!"

"Yes, there are reasons for charging and not, but for people on low incomes or unemployed it is stealing from the poor to line the fat cats and share holders accounts. The banks need a big kick to listen to their customers and not only the shareholders who dominate the actual bosses. The only other solution as I see it is for employers to pay their staff good old fashion hard cash! But not every one will want to "be loaded on payday". One solution maybe is for companies to set up accounts for their staff within the companies' financial systems and shoulder the cost by negotiation as they pay enough charges already but it could be incorporated into the charges."

"Yes, so long as one keeps one's accounts in credit (which means the banks have free use of your money) of course one should have free banking, and over certain balances it should not only be free, but also pay a decent rate of interest."

"Yes, the money in the bank is the customer's money and not the banks. They lend your money at high interest and pay the customer as little as can get away with."

"Yes, the banks make more than enough from my in credit balance on a monthly basis! Why should we have to put up with this?"

"Yes, the amount of money going through the banks daily must be astronomical. Therefore the banks should be able to reinvest a percentage of this to make more money to offset the cost of running the banks.
In this age of personal computerised banking it must be cheaper to run the bank accounts.
This is especially so when money can be transferred online therefore cutting out a lot of cash handling as well as the security costs of this."

"Yes, as I receive no interest on my current account deposit, the bank is able to utilise this at my expense and hence my banking is already not free!"

"Yes, surely, my bank has the benefit of my money if I am always in credit each month?
Therefore, why should I have to pay extra for banking!"

"Yes, my balance is their 'fee'....they obviously benefit from my credit balance."

"Yes, I am always in credit in my current account and I don't receive any interest from my bank, so with no interest my current account should be free."

"No, I live in Spain where banking isn't free. I really think that everyone in the UK should wake up to the fact that banking is a service that should have to be paid for just as any other profession. The fact is, that if the proposed government reform to 'ring fence' commercial banking from high street banking ever takes place to safeguard investors, means that the banks will be forced to charge for personal banking to make up any shortfalls. Besides, if you're paying for a service then you have more right to security being offered and then you truly have the right to complain."

"Yes, while banks consider it a right to use our 'safe' regular payments into current and savings accounts that pay effectively no interest in, to provide a capital base for them to gamble with financial vehicles, instruments, engines, futures etc, etc. If, however, the regulator separates the investment banking (gambling) from the mundane mortgage, personal loan, current account, savings account aspects, it might be considered reasonable to pay a small monthly administration fee. Although, I fail to see what's wrong with a business plan that borrows money between 0% and 2% from us and lends it at 5% upwards back to us."

"Yes, if banks insist on payment for current accounts, the truck act needs to be resurrected so that we can insist on being paid in 'coin of the Realm' - when we went over to bank transfer, instead of pay packets, accounts free from charges were offered to get us to switch! Chris - Leicester."

What next?

Compare basic bank accounts
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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