Banking on free banking
Banking on free banking
The decision by the online bank First Direct to charge some of its customers £10 a month just to keep their account open is not the end of free banking. There are already banks that charge many of their customers for their current account. And competition will ensure that free banking is always an option somewhere.
But it does change the relationship of every one of the 1.2 million customers with the UK’s best liked bank. The message is this. If you do not have an income of at least £1500 a year or you can’t afford to keep £1500 in your account (earning a paltry 1.98% interest) then we don’t want you unless you buy one of our other products – a credit card, a loan, a mortgage, or a savings account. In the management speak of its new chief executive Chris Pilling he wants "customers to deepen their relationship with us." Deepen their relationship? I don’t want a relationship with my bank. I want it to look after my money efficiently, pay me decent rates of interest, charge me fairly, and protect my personal data. If I choose to take out a credit card or a mortgage I want to be free to go anywhere on the market – many of them offer better deals than First Direct’s.
But you can avoid the £120 a year charge by spending just £1. If you open a savings account with First Direct then you will not be charged the £10 a month fee onn your current account. And you can do that with just £1. In a moment of candour Chris Pilling confirmed that "it is a way out of it; that is correct." And he added there were no plans to put any lower limits on that savings account.
But that still leaves a nasty taste in the mouth. Does First Direct want customers while they earn a decent salary (£1500 a month net means annual pay of £24,000 a year) but not when they retire on a smaller pension? Does it not want people on maternity leave, who have lost their job, or who have a fluctuating income from self-employment? People who in many cases have no money to save and do not want to take out a loan thank you very much.
First Direct is the first bank to impose a monthly charge on its customers unless they jump through hoops. But many of the High Street rivals have accounts with fees – charging up to £25 a month for ‘extras’ such as travel insurance and access to airport lounges. They are all bad value too.
Paying for basic banking is not something we do in the UK. And even with this retrograde move by First Direct, it’s not something we have to do. There are more than twenty banks and building societies out there which do not impose any conditions or charges on their current account customers. If yours isn’t one, switch.
Paul Lewis
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