Should you be paying for your current account?
Current account banking isn't free, and banks claiming to offer free accounts end up making us pay in other ways. Most of them fleece their most vulnerable customers with penalties and charges, in order to make money. The fair option is to charge everyone a fee for their current account, but would you be happy paying it for the sake of people who struggle more with money?
SEE ALSO: Triodos Bank offers new 'ethical' current account
See also: Cuts in rates and perks lead to more customers switching current accounts
See also: Would you go cash-free? One in five Britons keen to ditch notes and coins
We are used to the idea of free banking in the UK - ever since so-called 'free accounts' hit the market in the mid 1980s. Nowadays, when we agree to pay for an account it's usually because it's bundled with extras like travel insurance, mobile phone cover, or access to better savings deals.
Ethical bank Triodos, however, is trying to change the way we think about current accounts - by launching a current account with a £3 fee. The question is whether we are keen to pay it.
The argument behind the move is one of fairness. Huw Davis, head of retail banking at the bank, says: "There is no such thing as free banking, because someone else always pays. Free accounts are usually subsidised with high penalty charges and hidden fees, so the most vulnerable customers, or those making a rare miscalculation with the household finances, end up paying an exorbitant price."
A study by PWC in 2015 added that the current model means that some customers lose money for the bank, and that it had lead to the "risk of banks seeking to recover these costs by selling other products and services that the customer may not want or need." It added: "We can trace the history of this problem through the various mis-selling scandals in the industry over the last decade."
For those who regularly go overdrawn, paying a fee makes perfect sense. The bank calculates that someone banking with Triodos Bank with an authorised overdraft of £600 used for 7 days each month would incur overdraft charges of £23.06 a year compared with £84 at Santander and Halifax (£1 per day) or £96.30 with TSB and £97.24 with NatWest/RBS. It argues, therefore, that for anyone going into debt like this, the monthly charge is great value.
For those who tend to be careful with their cash, it's a harder sell - because currently you don't pay any fees, so why would you suddenly be keen to stump up £36 a year?
A study by PWC a couple of years ago would seem to show that we hate the idea. It found that despite the fact that 66% of people are aware that current accounts make money through hidden fees, 50% of them would leave their bank if they decided to swap this for an up-front monthly fee. Additionally, nearly two thirds (62%) of customers say they are not prepared to pay anything upfront for their current accounts.
There are still a couple of good reasons to consider a switch. It's worth pointing out that even if we stay in the black, we pay for our accounts through appallingly low interest rates - which are sometimes set at zero.
There's also the fact that we're all human - and all of us make mistakes. When shopping around for something like a current account we tend to be far too optimistic about how likely we are to go into the red, so we fail to appreciate just how much we will end up paying in charges. This account ensures that if we fail to live up to our incredibly high expectations, we don't pay a huge price for our optimism.
Then, of course, is the fact that the pundits are predicting a move in this general direction over time anyway. A Competition and Markets Authority report in 2015 looked into current accounts, and highlighted these issues. It didn't demand any changes to the current account market, but debate around the time of the report produced a consensus that eventually banks would be forced to come clean, and charge a fixed fee for current accounts.
After all, elsewhere in Europe this is the norm, and banks like ING and Rabo Bank all charge for current accounts.
But what do you think? Would you pay a fee for a current account? Or is this just another banking rip off? Let us know in the comments.