Money News

Barclays bank account holders hit with fees hike

Thursday 8 December, 2011

By Martin Fagan

Tripling fees for credit-impaired and financially vulnerable account holders could push them into banking hinterland, says watchdog.

Holders of a Barclays basic current account will see the fees charged for having insufficient funds to make payments tripled from March 2012.

If Cash Card current account customers have insufficient funds in their accounts to cover a direct debit payment, Barclays currently charges a maximum fine of £8 a day - regardless of how many payments the customer misses in that particular day.

However, changes to the account mean the bank can charge a maximum of three separate £8 fines in a single day, potentially tripling the fee to £24.

The Cash Card current account is designed for customers with low incomes, poor credit scores or who are discharged bankrupts and, although the account provides direct debit and ATM services, it has no overdraft facility.

In other changes to the account, Barclays will replace monthly paper statements with quarterly statements but will stop charging for text message alerts telling customers when they are running out of money.

This move comes after changes from RBS, which last month restricted its basic bank account customers to withdrawing cash at RBS group's cashpoints. Lloyds TSB also confines its basic bank customers to Lloyds TSB cashpoints.

Watchdog Consumer Focus is warning that changes made by major banks to basic bank accounts could push more consumers out of the banking system, heralding a downward trend in accessibility and penalties on basic banking which could discourage the “poorest and most vulnerable customers” from using bank accounts.

“These changes to basic bank accounts are a backward step by banks which could increase financial exclusion,” said Oliver Morgans, financial services expert at Consumer Focus.

“Living without a bank account can make it hard to live in the 21st century and can create financial penalties for the households who can least afford it.

“Minimum standards are needed to stop a race to the bottom for the poorest banking customers, and we need to see action from the banks and the regulator to make this happen.”

Consumer Focus says there are over a million people without a bank account in the UK and others who avoid using their account, often due to fears around charges. The watchdog is concerned higher charges and less accessibility means the poorest pay the most for their banking needs and receive the worst service.