Money News

Clearer current accounts promised with no fees

Penalty fee-free current accounts are coming to the high street.

Current account customers are being promised accounts without charges.

New plans will see customers offered the option of current accounts where payments are refused instead of facing penalty fees if they are processed.

The proposed changes come after work from the Office for Fair Trading (OFT) on clearing up current accounts and agreements from the major banks.

Last year the case between the OFT and the banks over overdraft charges came to a head in the Supreme Court, which found the watchdog could not rule on fairness of charges.

However, banks and building societies have been clearing up their act and increasing competition in the current account market.

Average charges for unpaid items have fallen from £34 to £17 over the last 3 years and unauthorised overdraft charges have fallen from £30 to £22.

John Fingleton, OFT chief executive, said: “The spotlight on personal current accounts has triggered substantial changes, which are still under way.

“Our end-goal is a current account market where banks make meaningful, real-time information available to customers, giving them more ability to control their balances and compare different banks' offerings.

“Account holders then need to use this information to actively manage their accounts and to switch banks when they feel they are not getting the best deal.”

The OFT is now pushing for better treatment of customers who do go overdrawn and get into financial difficulty and more tools so customers can monitor their accounts.

Eric Leenders, executive director at the British Bankers’ Association, said: "Retail banking is highly competitive and this competition for customers has resulted in some dramatic initiatives from banks.”

Chris Eagle, commercial manager at Creditchoices.co.uk, said: “Levels of switching current accounts are low, mainly I suspect because most people cannot face the bother and see no real differences between what the banks and building societies have on offer.

“However, you can take control. If you are regularly stung by fees it is worth comparing what the competition charges. If you are usually in credit, then look around for who has the best interest rates or other services.”