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| No | 81% | 101 votes | Total: 125 votes | |
| Yes | 19% | 24 votes |
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Add to FavoritesWith the cost of living, the temptation to spend is so great, and jobs at risk due to economic slowdown along with the sliding house price market, the banking is far from being a free service.
People arranging overdrafts are subject to a arrangement fee every time they request a new limit of further borrowing on their overdrafts. The cost to the bank is negligible in arranging the small amount of additional finance. The banks also levy interest that is charged to the consumers who enter authorised overdraft limits as well as heftier charges upon unauthorised overdrafts. Barclays bank charge customers at the moment and letter warnings
Then the little or no interest paid upon credit cards that have credit balances is another area where the banks make their money in investing in safe areas or which provides the bank in generating liquidity in authorising borrowers of loans, mortgages to have their finance.
Banks these days tend to offer a range of savings and current account products that have special benefits to certain types of account holders. These special accounts tend to involve paying a subscription on a per monthly basis which gives the account holder certain benefits, such as lower interest charged on their credit card, the travel insurance is also provided free or at a discount and so on. The banks make their money by advertising loans though most loans also include payment protection insurance which is an additional extra charged against the loan.
Arrangement fees and legal fees are also often added to a loan or mortgage which increases the total repayment amount beyond the advertised interest rate and monthly repayment schedule. This has the effect of potentially exceeding the term of borrowing and also it places greater pressure by adding extra small amounts to the total amounts that have to be repaid. Also there are payments for late or missed payments which vary. Then if someone is in serious trouble the banks might repossess the house if a customer is in serious repayment difficulties and has no way of keeping up the repayments.
Banks advertise the student loan service products as being interest free 0% products, though this does not take into account the small rate of interest charged upon student accounts and also the conversion of a student account to a current account that has a paid subcription. Such is a students own level of typical debt owed on that account that it can take a lengthy amount of time to repay and hence the banks are able to progress further by making these subscription based service accounts. These fees of subscription accounts are currently charged from 9.95 a month to around 14.95 a month. Some are around 19.95. The bank customer service assistants make a special attempt in promoting the benefits of using these paid current account types and are relatively quiet and give the paid subscription accounts good lip service.
Banking also is not free for those taking out loans, credit cards are for those who take out other borrowing related products from a bank. For those people who take out car, travel or health insurance from a bank, the costs incurred at to the costs of doing business with a bank. I would rather not allow myself to be drawn into taking out unnecessary financial products from banks. Certain products are helpful in later years, though at a young age these financial products I find unsuitable for myself and require no thought.
Free banking facilities exist for those in credit on a regular basis.
Learn more about this author, Costas Chryanthou.
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Yes
Free banking has long been a fundamental element of UK current accounts, in comparison with the US where checking account customers are usually required to pay a monthly or yearly subscription fee.
However, the term 'free banking' may mean different things to different people, so it's worth starting by defining what free banking is and what it isn't.
Put simply, free banking means that if you keep your balance in credit (i.e. above 0) then you will not incur any charges. Most UK banks offer at least one free banking current account, so all UK bank customers should have the option of benefiting from free banking.
Free banking, however, does not mean that the bank will never apply any charges to your account. If you exceed your agreed overdraft limit, then the bank will apply an unauthorised borrowing charge and may also apply paid referral or unpaid item charges where a transaction has either been allowed to go through or has had to be declined whilst you've been in an unauthorised overdraft position.
In my view, this is a fair enough arrangement. If I am sensible and maintain my account correctly, then I get the account for free. If, however, I abuse my account, then I know that I will incur charges. The controversy over charges, in my opinion, is more about the level of charges applied rather than the right of banks to charge them.
It's worth also pointing out that the dominance of free banking in the UK is under threat. We've seen a growth in the sale of packaged accounts rather than free banking accounts. Packaged accounts offer a range of additional benefits (such as discounts on insurance, concert tickets, etc) and in return you pay a monthly subscription charge. This is more in line with the US model and is becoming increasingly prevalent in the UK. There have been some suggestions that the UK banking industry may ditch free banking and move to the US model, meaning that all UK current account customers would be required to pay some sort of regular subscription fee.
My view, though, is that customer choice is all important and I would like to think that UK banking customers will continue to have a choice between the standard free banking accounts and the more fancy packaged or subscription-based accounts. Free banking is something that we in the UK should appreciate (in the same way as we should appreciate free health care via the NHS) and still has a place in the 21st century banking landscape.
Finally, just because an account is a free banking account doesn't mean that it's automatically a brilliant account. You might get one free banking account offering 2% creditor interest, whereas another free banking account offers no creditor interest. Free banking, therefore, is just one element that you will need to look at when choosing a bank account. And, depending on your circumstances, you might find that a packaged account works better for your individual circumstances. As with all things, it pays to shop around and make an informed choice.
Learn more about this author, Simon Wright.
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