Leading banks seek to recoup charges

by Gill Montia

Story link: Leading banks seek to recoup charges

The High Street banks may yet turn out to be the victors in their battle with customers reclaiming charges for unauthorised overdrafts, by introducing a system already used in Australia and the United States.

Recent reports in the press suggest that so called free banking could end in the UK and customers could find themselves paying as much as £500 a year simply to operate a current account.

According to Moneysupermarket.com, the price comparison website, customers paying for each cash withdrawal, direct-debit payment, standing order or written cheque could face a bill of up to £300 a year.

This would apply to the average customer who makes about 35 transactions a month but the fees would increase to £500 for anyone making more than 50 transactions.

Leading retail banks are all looking at ways in which to recoup the revenue lost by the Office of Fair Trading’s ruling about excessive penalty fees for unauthorised overdrafts.

HSBC has so far paid £116 million in refunds, HBOS £79 million, Barclays £87 million, Royal Bank of Scotland £81 million and Lloyds TSB £36 million.

First Direct and Citibank have already introduced a monthly fee on some current accounts, whilst other banks are seeking different methods to make up their losses.

For example, the Bank of England’s 0.25% increase in the base rate in July has only been passed on by around half of leading savings providers.

Of those increasing savings rates, more than a third passed on less than the full 0.25 percentage point rise.

For some borrowers, however, overdraft interest rates have increased by almost one full percentage point.