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The End Of Free Banking In The Uk?

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http://money.uk.msn.com/Banking/Current%20...cumentid=718964

Is this the end for free banking?

By Matthew Plowright

August 01 2006

A leading UK high street bank has warned that the reintroduction of charges for current account and credit card holders is “inevitable”, sparking concerns that free banking in Britain could soon be a thing of the past.

HSBC, Britain’s largest bank, admitted yesterday that it would almost certainly reintroduce monthly charges for its personal banking customers as a result of an Office of Fair Trading (OFT) clampdown on penalty fees.

Earlier this year, the OFT ordered banks to cut their credit card penalty fees from an average rate of £25 to less than £12. And this move has prompted HSBC chief executive, Dyfrig John, to warn that the current free provision of bank services for customers who remain in the black is untenable in the long-run.

"We moved quickly to meet the regulator’s regulation but it is clear that we have to look at our relationship with our customers fundamentally. They want more transparency and that means inevitably moving towards a fee-based product,” Dyfrig John said.

“That would most likely mean a monthly charge."

The return of fees

Should HSBC re-introduce monthly or annual charges, it is unlikely to be acting alone. The OFT’s ruling on card charges has hit the industry across the board and the watchdog is currently looking into similar action with regard to overdraft charges, which would represent a further loss of revenue for all UK banks.

For most banking customers under the age of 40, having to pay an annual fee for their current accounts or credit cards, even if they remain in the black throughout and always make their repayments on time, would be an extremely unpopular move.

However, until the mid 80s, when Midland Bank became the first UK operator to scrap annual banking fees, charging customers for services was common practice across the board. Most banks in the US and on the continent continue to charge an annual fee for account holders.

In addition, HSBC warned yesterday that the level of consumer debt in the UK was now “excessive”, adding that it was forced to write off almost £2 billion in loans and credit card debt during the first six months of the year.

Record profits

Nevertheless, the general public is unlikely to have much sympathy for the big banks should they reintroduce charges.

Dyfrig John’s announcement came as HSBC unveiled record £6.7 billion first-half profits, an increase of 18% on the first six months of 2005.

The bank claims that most of this profit was derived from its overseas operations, with UK personal banking operations accounting for less than 6% of its overall profits.

However, while this may sound insignificant, its eight million UK account holders brought in a £377 million profit for the global banking corporation, the equivalent of 93p per week per account holder.

And with the UK’s other leading banks - Lloyds-TSB, Barclays, RBS-NatWest and Halifax – all expected to announce similarly impressive profits this week, pressure is mounting for action to curb banks’ burgeoning profits.

Liberal Democrat Treasury spokesman Vince Cable branded HSBC’s proposals to reintroduce charges “astonishing” and reiterated his calls for an urgent review of the banking sector and its accountability.

“There is a serious question mark about the level of profits in the banking sector,” Cable said. "Piecemeal and ad-hoc investigations by the OFT are being relied upon too heavily while the level of charges [rises] and levels of service deteriorate.”

He added: “There is now an urgent need for an overall review of the banking system…whose recommendations must be more seriously investigated."

Account holders will now wait with baited breath to see whether the reintroduction of charges is mentioned by the UK’s other leading banks when they unveil their profits later in the week. But with the entire industry affected by the OFT’s ruling and with bad debt an increasing problem in the UK, the reintroduction of fees in the near future looks extremely likely.

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This is BAD news for UK current account holders. Fees for banking in the USA are very common. However, if you're careful and don't borrow and keep a minimum amount in your bank or get paid by bank credit (direct deposit) you may be able to avoid fees. Current accounts in the UK are known as checking accounts in the States.

Here's what HSBC America charges its customers. Not too bad, wait until you read Valley National Bank's charges below.

http://www.us.hsbc.com/1/2/3/personal/chec...nking?code=husa

Free Checking, Extra Conveniences

No direct deposit required

No monthly maintenance fees

No minimum balances

Free first order of selected wallet-style checks (Note: You have to pay up to $15 for your next lot of cheques!)

Free Internet Banking and Bill Pay!

Free RecordCheck®

HSBC Debit MasterCard® Card with PayPassTM or ATM card

Free 24/7 telephone banking

Basic Banking

If you only write a few checks a month or keep a small checking balance,

a Basic Banking checking account may be right for you. There's no

minimum balance requirement and the monthly maintenance fee is just

$3 per month. And, we will process up to 8 checks/withdrawal slips each

month at no charge. After that, it's just $0.35 per check or withdrawal slip.

Valley National Bank

Convenience Checking

Valley's most popular checking account - unlimited check writing privileges with a low minimum balance requirement.

Unlimited check writing

Minimum initial deposit $100

No service fee if you maintain an average daily collected balance of $700 per month; if below - $7 monthly fee applies

Non-interest bearing

Free check images with monthly statements

Eligible for Direct Deposit, Online Banking & Bill Payment, Valley Check Card and Valley's National Discount Program

NJ Consumer Checking

A great first checking account for New Jersey residents with no minimum balance requirement.

8 checks per month included, $.50 per additional check, no limitations to deposits and non-check withdrawals

Minimum initial deposit $50

$3 monthly service charge regardless of balance

Non-interest bearing

Free check images with monthly statements

Eligible for Direct Deposit, Online Banking & Bill Payment, Valley Check Card and Valley's National Discount Program

NOW Checking

Interest bearing account that offers unlimited check writing privileges and no per check charge.

Unlimited check writing

Minimum initial deposit $100

No service fee if you maintain an average daily collected balance of $1000 per month; if below - $9 monthly fee applies

Interest bearing

Free check images with monthly statements

Eligible for Direct Deposit, Online Banking & Bill Payment, Valley Check Card and Valley's National Discount Program

Now for some bad banks that rip-off their customers...

Citibank for example - who the heck can "maintain" a minimum monthly balance of $1,500???

https://web.da-us.citibank.com/cgi-bin/citi...;BS_Id=Checking

Citibank® EZ Checking

You can avoid monthly service fees by making two monthly bill payments, by having a Direct Deposit to your checking account during the statement cycle, or by maintaining a combine average balance of $1,500. Otherwise these fees apply: $.50 per check in CA and NV; in all other markets you get 10 free checks: after that, it's $1 each. There is also a monthly service fee of $7.50 fee in NY, NJ and CT and $9.50 in all other states.

Citibank Full Service Checking

If you don't meet the $6,000 combined average balance, then these fees apply: $.50 per check in all states; $1.50 for each withdrawal from a non-Citibank ATM in all states; a monthly service fee of $9.50 (Regular Checking) and $12 (Interest Checking) in all states except CA, NV, FL and IL, DC, VA and MD, where it's $12.50 (Regular Checking) and $15 (Interest Checking). Fees charged by other institutions for transactions on non-Citibank ATMs are beyond Citibank's control and are in addition to the fees described herein.

Edited by drhewitt

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Guest absolutezero

All that will happen is one bank will decide to stay free.

Customers will flock to that bank. Me included.

It's not something that worries me.

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All that will happen is one bank will decide to stay free.

Customers will flock to that bank. Me included.

It's not something that worries me.

I agree, its just some kind of 'warning spin' from the Banks to ease people into the reality of the debt the Banks have helped induce.

Someone like Cahoot would just you it as the perfect chance to get thousands of new customers if some of the high street banks started to introduce charges on standard accounts.

We should also remember that many accounts already have charges, which people happily(read stupidly) pay so they can have the status of being a 'gold/platinum...someone more special customer' :ph34r: .

AFP

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Is it really a great surprise that Banks are introducing charges. The public want free banking, interest on their current accounts banks on every corner, interest free credit cards and no fees for deliquent accounts. If you are realistic you have to expect fees. I would prefer fees in return for fair rates on borrowing and savings

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Guest Bart of Darkness
I would prefer fees in return for fair rates on borrowing and savings

Well one out of two ain't bad!

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If you only write a few checks a month or keep a small checking balance,

a Basic Banking checking account may be right for you. There's no

minimum balance requirement and the monthly maintenance fee is just

$3 per month. And, we will process up to 8 checks/withdrawal slips each

month at no charge. After that, it's just $0.35 per check or withdrawal slip.

You can get round this sometimes in the US, I have a Bank of America account and by putting an automated $50 into its savings account each money (which you can move back online whenever) you pay no fee.

I am sure the banks here will do the same sort of thing if they impose charges. There is no way their first introduction of charges will hit everyone, there will be ways around them - mainly I would assume by trying to get you to use their other products as well.

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All that will happen is one bank will decide to stay free.

Customers will flock to that bank. Me included.

It's not something that worries me.

Yes just move to a mutual like nationwide. wave banks goodbye

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Yes just move to a mutual like nationwide. wave banks goodbye

Yes, and the Nationwide act more like a bank every day.

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Yes, and the Nationwide act more like a bank every day.

True, but the members still elect the board and running on a policy of "no fees" would be quite, shall we say, popular.

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More important than that is their credit card and debit card don't have the 2.5% loading fee that the other banks have.

If you spend any more on a card while abroad and you are not using nationwide (or one of the very few others that do this) you are paying 2.5% or so more on everything you buy than you would with nationwide.

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Is it me or is current account banking not really free anyway? 0.1% interest on your pennies does not cover even GBs inflation figures!

My 6p pcm interest with HSBC would be worth £3 with the Halifax. So I effectively pay HSBC £2.94 a month for being loyal.

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  • 301 Brexit, House prices and Summer 2020

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      • down 5% +
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      • up 5%



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