Lowering credit card charges 'may end free banking'

15 June 2006
According to comments made by internet financial site Moneyfacts, banks may abolish free current account banking facilities to offset a loss of revenue from cuts in the late credit card payment charges.

Several of the larger UK high street banks, including Barclays, LloydsTSB and HSBC, have announced they will be reducing charges from £20 or over to £12 in the next two months.

However, Samantha Owens, research editor at Moneyfacts, has said that in doing so, banks will look to recoup their losses here with charges and fees elsewhere. This could mean the end of free current accounts.

"Some banks mentioned that if there was going to be a cut in credit card charges, they were going to start charging on current accounts, so there wouldn't be free banking anymore," Ms Owens commented, although she did temper this by saying that such a scenario was unlikely.

"Hopefully there will be enough competition in the market to make sure these charges don't actually take off," she said.

Alternatives to charging for current accounts could be banks raising their basic rates of interest on credit cards or overdrafts on accounts, or find other charges to implement or apply more stringently.

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