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UK banks and building societies have increased charges by up to 20% on average in the past three years, says financial research company, Defaqto, in a new report. Indeed, average penalties for bounced cheques, unpaid standing orders or direct debits are now more than £30 compared to around £27 in August 2003.
t argues that customers who pay fees for unauthorised overdrafts at an estimated annual cost of £3 billion are effectively subsidising those who don't incur charges. Hence, Office of Fair Trading action to cut the penalties could mean all customers suffering as providers move to charging account fees for all customers and, possibly, introducing fees for customers who use their accounts heavily.
The Office of Fair Trading has already forced credit card providers to cut default charges to £12 and is considering similar action in the current account market. Earlier this month it announced it was undertaking further work on current account fees and will decide whether to launch an investigation by early 2007.
Putting some numbers on it, the average stopped cheque fee, according to Defaqto, has risen by 10.2% to £7.34 since August 2003. The average unpaid cheque fee meanwhile has jumped 19.7% to £32.81, while unpaid direct debit fees have typically risen by 16.3% to £31.93.
Not all bank charges have been increased however. In fact, banks have cut overdraft letter charges from an average £17.97 in August 2003 to £14.87 now. And not all banks charge fees. Abbey, First Direct, and Nationwide Building Society, for example, don't levy stopped cheque fees on their main accounts while Barclays, HSBC, Clydesdale and Yorkshire don't charge on some of their premier accounts.
Elsewhere, Bank of Scotland and Halifax don't charge unpaid standing order or direct debit fees on their Youth accounts and HSBC doesn't on its Premier account.
However some accounts charge substantially more than the average default charges. Cahoot's cheque book account demands £12 for stopping a cheque - the highest on the market. Meanwhile, Bank of Scotland and Halifax charge £39 for unpaid cheques, standing orders and direct debits on their Current Account, High Interest Current Account and Moneyback Current Account.
13 September 2006 © Moneyextra
