British banks are talking more and more about introducing charges for basic accounts, even where the account holder is in credit. They justify this on two grounds: first, that Britain is practically unique in having any form of free banking; and second, that they have to do this to pay for the cost of running the banks.
I’d like to point out a few other facts. One thing is that banks invest the money which is placed in their care. It doesn’t just sit there doing nothing. That is why they can declare such colossal profits every quarter in spite of offering free banking and catering to thousands of bad debts. They make a fortune out of the customer’s money.
If the bank lends me money, I expect to pay them for the privilege; but effectively every customer is lending their money to the bank as long as they remain in credit, and the banks are now demanding that customers pay for providing the banks with capital. The basic reason behind the banks’ decision to introduce these charges is that they have been called to account for the exorbitant fees they levy on those who do go overdrawn.
It seems to me that they should reduce those charges, and target those who are persistently bad debtors, rather than passing on the costs to those who by the very nature of the accounts they are allowed to have cannot overdraw their funds. As long as quarterly profits in the billions can be declared, how can any bank say it cannot afford to run free accounts? Each account in credit earns enough as part of the bank’s assets to pay its own running costs.
Another point is that Britain is also unique in having a government which has forced citizens in receipt of benefit to open bank accounts in order to receive those benefits. The high street banks have benefited from this in that they have millions of pounds of government money passing through their hands – money which used to pass through the post office branches which are now being shut down all over the country, so that if people decide they do not want to pay bank charges, they have no alternatives available.
No other nation has forced its citizens to take up bank accounts in this way. If charges are introduced, will the state be prepared to meet them for all the people on state benefits who will be made poorer by this? There are also very few countries where employers so frequently insist on paying their staff directly into bank accounts.
Most employers these days refuse to pay any other way, since they can save money on administration and security – no need to employ an armoured car or an office full of wages clerks when pay goes direct from one bank to another – and employees who have no account are forced to open one as soon as they are offered a job. Will the employers increase wages to cover these bank charges?
In short, the high street banks are taking advantage of having a captive market who have been forced, in many cases against their own wishes, to take up accounts with them. The people who will suffer most are those who have managed their incomes to avoid debt, and in a country with one of Europe’s worst debt crises, anything which discourages people from financial prudence has got to be a bad move.