RBS customers banned from rival ATMs

by Robert Powell on 24 August 2011  |  39 comments
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If you hold an RBS or NatWest current account, you could see the number of cash machines that you are able to use slashed over the next two months...

As far as money myths go, the cash machine noise story is a good one.

The tale first appeared on a design website back in June and claimed that the ‘whirring’ noise made by automatic teller machines (ATMs) before they dispense cash is actually fake. Yes, according to Humans Invent the sound is generated by speaker to reassure the customer that their money is on the way.

However the claim was quickly discredited when several ATM engineers replied to the article and rubbished the story.

The site is now attempting to confirm if the motors inside ATMs are tuned to make a certain sound when dispensing cash. But whatever the truth in this tall tale (very little, I would wager), it’s undeniable that ATMs play an important part in most people’s financial lives. Which is why RBS’s recent announcement concerning them should be of prime concern to the bank’s customers...

Punishing the poorest

Royal Bank of Scotland (RBS) is to ban basic current account customers from using cash machines owned by rival banks. The change will also affect holders of no-frills banks accounts with NatWest, a subsidiary of RBS.

Basic bank accounts are intended for financially vulnerable people with low incomes and patchy credit scores. Banks began introducing them in the last decade after considerable pressure from the government. They do not offer overdrafts or in-credit interest but play a vital role for many people who would otherwise not be eligible for a bank account.

New RBS basic account customers are already barred from using rival ATMs. The ban for existing customers will come into force over the next few months.

The bank – whose parent company, the RBS group, is 84% owned by the government – has said that customers will still be able to use nearly 20,000 machines. Basic current account customers will only be able to withdraw cash from RBS, NatWest, Tesco or Morrisons ATMs or over the counter at the Post Office.

Rural customers with few cash machines nearby could be hit especially hard by the change.

ATM fees

RBS blamed the ban on the charges levied on them by the ATMs of rival banks. As we reported last year in How ATMs make money, cash machines charge card issuers a fee every time a customer uses their outlet.

The bank says that as it already runs basic accounts at a loss, it is unsustainable to keep offering ATM services with rival branches.

Lloyds TSB already restricts basic account customers from using ATMs it terms as ‘away’, while other banks have placed restrictions on the in-branch services available with no-frills accounts. Nationwide cashcard holders have to withdraw a minimum of £100 when they use counter services, while HSBC basic account customers cannot make cash withdrawals over the counter.

The change by RBS has also fuelled fears of a surge in independent machines that hit every customer with fees.

So what can you do if you find your ATM access cut-off over the next few months?

Switch out

A simple solution is to switch accounts. Many other banks offer basic accounts and – as I mentioned above, with the exception of Lloyds TSB – most will still allow you to withdraw cash from rival ATMs.

Here are a few of them:

Obviously if you apply for an overdraft on a basic account, the bank will look into your credit history to decide whether to grant you this facility or not. And even then, the level of borrowing you will be offered will depend on your financial situation.

Alternatively, if you’ve managed to improve your credit history you may want to think about upgrading from a basic bank account to a deal that pays interest on your balance or offers a 0% overdraft. Although if you are planning on following this route, it’s a good idea to check your credit history before you start applying for accounts. Head over to our credit report centre to get a free report through Credit Expert – just make sure you cancel the service before the free trial period ends.

Here are some of the best current accounts around at the moment across the market:

As you can see, there are some good deals out there. But to get the very best interest rates and 0% overdraft lengths you will need to jump through a few funding hoops. The Santander Preferred Account obviously offers the best interest rate – paying out at 5% on balances up to £2,500. However as far as customer service goes, the Spanish bank’s record is chequered to say the least.

If you’re after top customer service you’d be better off plumping for either the Co-operative account or First Direct’s 1st Account – two banks with sparkling service histories. Halifax’s Reward Account is also a good bet if you’re not after an overdraft and can pay in at least £1,000 per month as you’ll receive £5 cashback every month.

And finally, before you take out any new current account make sure you take a look at this article and steer clear of The five biggest current account traps.

Is this fair?

What do you think of the RBS change? Should banks be able to charge you for withdrawing your own cash?

Have your say using the comment box below.

More: Compare current accounts | Ditch these current accounts – quick! | HSBC imprisons customer for her overdraft