As the Bank of England hints at cutting the base rate from 0.1% to below zero for the first time in its 326-year history, three of the UK’s biggest lenders are debating the introduction of new current account fees.
With the central bank warning of potential negative interest rates, Nationwide, HSBC and Virgin Money have warned they may have to introduce charges elsewhere to make up for losses through lending money.
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If this comes to pass, customers could soon have to pay to hold their wages in their bank account.
Currently, the vast majority of Britain’s 73 million current account holders pay no fees.
HSBC could begin charging “basic banking services” fee
HSBC said it could start charging for basic banking services in some countries after it reported a 35% fall in quarterly profits.
It said it was considering charging for products such as current accounts, which are free to UK customers.
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By GlobalDataThe bank said it was losing money on a “large number” of such accounts.
A spokesman said it was committed to continuing to provide free “basic bank accounts” in the UK but admitted this remains under review.
“Whatever happens with negative interest rates, HSBC UK is committed to continuing to provide basic bank accounts with fee-free standard operations but always keep under review the pricing for our standard current accounts and associated services,” a statement said.
The bank, which is in the midst of cutting 35,000 jobs, has been hit by both the pandemic and fraud allegations in recent months.
Virgin could try “slow and incremental changes”
The boss of Virgin Money, David Duffy, has also warned that banks could start charging for basic services if interest rates turn negative.
Duffy said banks would make slow and incremental changes over the next three to five years to test which services customers are willing to pay for, adding it “can’t all be free”.
In August, the lender resumed its restructuring plans, after acquiring Clydesdale and Yorkshire banks in 2018.
If it starts charging account holders – customers at all three banks would be affected.
Nationwide “has no current plan,” but could charge for statement and lost card
After holding an internal review of the matter, Nationwide – which has more than 8million customers – said it has ruled out charging customers for everyday banking.
The building society said: “we have no current plans to introduce any new charges on current accounts.”
It said it “would be able to withstand the financial impact of negative rates for longer than our main high street competitors”.
This is because it tends to pay more interest on savings accounts than its rivals and so it can reduce those rates rather than bring in extra charges.
However, some measures, such as paying for paper statements and lost debit cards could be introduced.
