Is this the end of free banking?

Government ministers have intimated that free banking could soon be a thing of the past.

Chairman of the Treasury Select Committee Andrew Tyrie has urged ministers to remove the obstacles that stop banks charging for their accounts.

What's more, Andrew Bailey, the man set to become chief regulator of the financial services industry, has described free banking as a "dangerous myth" that needs to be consigned to the history books.

He said that while many consumers believe that their savings account is free, there are actually an array of 'hidden' charges that essentially means people are paying for these facilities.

In particular, Mr Bailey raised concerns about the extremely low interest rates that are paid on many accounts – rates that are often below the rate of inflation.

"In short, I think that the reform of retail banking in this country cannot move ahead unless we tackle the issue of free in-credit banking," Mr Bailey said.

He added that consumers should be offered complete transparency, so that they are fully aware of what they are paying for and how it is being paid for.

Mr Bailey went as far as to suggest that the hidden charges on accounts give such an unclear picture of what financial services cost to administer, that it could have "encouraged" the mis-selling of other products.

Michael Ossei, personal finance expert at uSwitch.com, said that proposals to end free banking have always been a bone of contention for voters.

"However, for customers that rely on overdrafts banking is already an expense and in some cases vulnerable customers can end up paying over the odds," he said.

Mr Ossei concluded that if fees for in-credit banking were to be introduced they would have to be levied at a relatively low level so that consumers are not put of high street banking altogether.

Posted by Paul Thacker