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There was a lot of fuss in the newspapers last weekend about "the end of free banking" in the UK. First Direct already charges a monthly fee of £10 to those who deposit less than £1,500 a month into their current accounts; Citibank is about to transfer its customers on to its new Plus account (also charging £10 a month) and a variety of other banks have begun to run accounts with charges attached parallel to their free' accounts. But the furore about all this misses one vital point: there is no such thing as free banking available in the UK and there hasn't been for a long time. Instead, the average retail account yields its provider around £230 a year, up from £120 ten years ago.
Bank account yields: interest and overdrafts
Much of this cash is gouged out of the accounts of what the banks like to call delinquents' in the form of various overdraft and bounced cheque charges, but the rest comes from the mainly innocent. The most obvious cost to us of having a free' current account is interest. We get none, or almost none, on current-account money instead, the bank just gets to use our money for free. But this is only the beginning of the sleights of hand used by Britain's big banks in their quest to separate us from our cash as efficiently as possible: who do you think gets to keep the interest on your money during the mystery three days between when you make a money transfer or write a cheque and the money leaves your account, and when it finally reaches its destination?
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Bank account yields: cross-selling
It's also worth remembering that current accounts are the basic building block for the banks when it comes to their favourite thing, cross-selling: once they have you handing your monthly salary over to them, you're at the mercy of their hordes of salesmen and their offers of loans, loans and more loans. Given all this, I'd be happy, in theory at least, to give up my free banking (cost: who knows?) for a paid-for current account (cost: £10 a month) as long as the monthly fee was all I ended up paying. I'd rather know what I'm spending and why than be hostage to a barrage of opaque charges I can't quite add up.
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However, I say I'm in favour in theory rather than in practice because I know how our banks work. They aren't going to introduce fee-based current accounts instead of all the other charges. No, they are going to introduce them on top of all the other charges. Not long now and we'll all be paying £10 a month for the privilege of having the likes of Barclays and Lloyds TSB pay us no interest on our own money, insist that it costs £20 to make immediate electronic transfers, charge us £30 every time we go 2p overdrawn, bombard us with bamboozling mail shots and, of course, fail to answer the phone when we call to complain. We might want transparency from our current accounts, but what Britain's banks want is simply to make more money out of us.
