Banks reject criticism of free accounts ‘myth’

Other ways in which banks make money from supposedly free accounts is by charging up to 19.9 per cent interest for agreed overdrafts – more than many credit cards and personal loans – and through “hefty fees” for overseas transactions, said consumer champion Which?.

Which? chief executive Peter Vicary-Smith said: “When some people are paying up to £900 a year in bank charges it completely shatters the myth that banking is free.”

But the British Bankers’ Association (BBA) branded the report “disingenuous” and said customers could still get free banking for accessing cash and making most types of transactions in the UK. Which? said charges for unauthorised overdrafts vary greatly between banks – the Halifax Reward Current Account charges £120 a year for going into the red for two days in a row every month, whereas at the other end of the scale the Yorkshire/Clydesdale Bank Current Account Plus charges £900 a year for the same scenario.

And many banks, including RBS/NatWest and HSBC, charge an annual percentage rate of 19.9 per cent for authorised overdrafts.

More than six in 10 people surveyed said they had paid a charge they considered unfair, hidden or disproportionate.