OFT to investigate bank current accounts

Monday 30th April, 2007 

Everyone knows there is no such thing as a free lunch (or in the age of the internet a free download). This week the OFT are set to investigate if free banking is really free.

The investigation will help the OFT consider the current level and incidence of the charges in the broader context of efficiency, transparency, value and consumer choice within personal current accounts.

British banks don't charge up front fees for most of their current accounts but with the banks feeling the squeeze from the regulators on overdraft fees and other penalty fees they can impose could mean an end of free banking.

But would an end to free banking be a bad thing? Consider the length of time it takes to one cheque cleared anything up to 5 working days!! Where does the money go in between the cheque being written and it eventually finding its way into your account? Answer is your money is used by the banks from which they make profit.

The truth is that current accounts are always going to make some cash for banks - if they're overdrawn they take interest, if they're in credit they make interest by re-investing. Once they have you they push more lucrative products - such as mortgages, pensions, credit cards and insurance in your direction.

So will the banks start charging for current accounts? Probably not. Because, if two banks start charging then you'd probably move to the bank which is free. Simple economics, an area where banks excel. Regardless of the findings of the OFT, free banking is here to stay.