UK Monthly bank fees are not wanted

Few people would prefer monthly bank fees to the current system of high penalty charges, new research suggests.

The High Court is set to decide in a test case whether the level of penalty charges made by banks is legal.

If it rules against the banks, they may try to recoup money with monthly fees or by charging for each transaction.

At the moment, people can be charged as much as £35 for going overdrawn without agreement or for having a direct debit refused.

The Office of Fair Trading (OFT) is investigating the current penalty charges system.

Kevin Mountford, head of current accounts at moneysupermarket.com, said free banking was possible “largely because of the number of people who are hit with fees and charges”.

If this was outlawed, a pay-per-transaction system – as used in many other countries – could become a reality for the UK.

“We could well see the system prevalent in Western Europe, North America and Australia, where there are a certain number of free transactions and then you pay for any additional ones,” he said.

“We have already seen some providers abandon the concept of free banking by steadily introducing a bevy of charges on their less profitable customers.”

The introduction of such transaction charges could lead to a change in the spending habits of individuals used to making cash withdrawals or multiple card transactions, he added.

These people were likely to make efforts to reduce costs, he added.