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Free banking myth exposed as nine out of 10 current accounts charge customers

Free banking across Britain’s banking industry is pretty much a myth (John Keeble/Getty Images)

Free banking is a myth as nine out of 10 current accounts charge customers to use them.

Most banks levy either an account management fee or charges for operating an overdraft.

Those who pay a regular management fee will be shelling out about £147 a year on average, but only eight of these account options pay credit interest on a £1,000 balance.

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In fact, despite already paying a management fee, around 77% charge a usage fee for arranged overdrafts and 60% will charge for breaching an unarranged limit.

According to research by comparison site, customers who don’t pay a regular management fee aren’t necessarily better off.

They may find themselves paying excessive overdraft charges when they dip into the red.

Average monthly funding Paying interest at £1k Average account fee Authorised usage fee charged Unauthorised usage fee charged Total account options
Current accounts with an account fee £181.91 8 £147.43 36 28 47
Current accounts with no account fee £259.09 7 N/A 19 22 33
All accounts £213.75 15 £86.62 55 50 80


More than half of current accounts without a regular fee (58%) charge an authorised overdraft usage fee and 66% will charge an unauthorised usage fee. Only seven of these deals pay credit interest.

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“It’s clear to see why consumers should question whether they can acquire a ‘free’ bank account these days, with free banking becoming a bit of a myth,” said Rachel Springall, finance expert at

“The way providers charge customers for going overdrawn has been leaning towards usage fees rather than interest, which in most cases is much more expensive.

“Daily usage fees can be excessive and a nasty surprise as time passes, and what’s worse, most accounts now penalise you for dipping into an arranged limit.”

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Only a handful of banks – M&S Bank, Metro Bank, Nationwide Building Society, Post Office Money and Tesco Bank – offer an account without management or overdraft usage fees, she said.

Instead, they charge interest for their overdrafts, which can be much more cost-effective.

Springall called on banks to provide current account deals that offer customers all the traditional basics, but also give them the opportunity to be rewarded for their loyalty.