Should free banking be abolished?
A Bank of England official has suggested that free banking should be abolished. Does that really make sense?
The idea that banks should be forced to charge for a service they currently offer for free might seem odd.
But there is an argument for the idea. Because the banks don't charge a fee for the majority of current accounts, they're arguably forced to generate revenue via other routes. So we've seen very high penalty fees for late payments and such like as well as very high interest rates and charges for unauthorised overdrafts.
There's also the fact that most free current accounts pay very poor interest rates for any credit balances.
So the Bank of England official, Andrew Bailey, has suggested that an end to free banking could create a market where current account charges are transparent and fair, and no one suffers unduly.
Of course, the opposite view is that free current accounts are a great boon for many people. If you manage your current account carefully, there's no reason why you should pay any charges for your current account at all.
The two golden rules for free banking are simple:
- keep your account in the black at all times
- make sure you don't leave large deposits sitting in your current account earning paltry levels of interest.
What do you think? Tell us in the comments box below.