Bank Current Account Overdraft Chargers, the End of Free Banking
Personal_Finance / UK Banking Aug 22, 2012 - 07:22 AM GMTBy: MoneyFacts
Why do banks need to charge for current accounts? Over the last ten years, the Bank of England Base Rate has fallen drastically but overdraft rates have had a ‘cushioned’ fall.
The table below shows the average overdraft rate over the last ten years alongside BoE Base Rate. It highlights that although base rate is at an all-time low of 0.5%, overdraft charges are still making a sizable return for the banking sector.
Even when BoE Base Rate was 5.75%, we were charged less for overdrafts than at the current 0.50% of today.
Sylvia Waycot, spokesperson for Moneyfacts.co.uk, comments:
“If we do see an end to free banking, either with account charges or transaction fees, we will end up in a position where once BoE Base Rate returns to a more normal level banks will be in the luxurious position of high overdraft charges and sanctioned account fee charges.
“It begs the question, is the Financial Services Authority’s need to remove free banking more to do with the lessening of profit derived from current account users due to the economic climate and if so, would removing free banking be a long-term measure for a short-term problem?”
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