While many in the banking sector have often highlighted the “free banking” culture whenever there has been any criticism of the sector, what is “free banking” and did it ever really exist?

The term “free banking” is often a very difficult one to understand because if you check the facts, have we ever really had “free banking”? Have our savings always kept pace with base rates? Have we never been charged for any traditional banking services?

The cold facts are :-

· Current accounts do not normally attract the same interest rate as deposit accounts, thereby many of us are “losing” out with our current account balance – a back door charge?

· Deposit account interest rates are nearly always less than the base rate at the time – enabling banks to “borrow” your account balance and either place on deposit in the banking system, at a higher rate, or use to fund loans to customers, at a much higher rate.

· Charges for statements are becoming more and more common, and have proved to be a nice little income stream for the banking sector.

· While not very common as yet, some banks have brought in extra charges for customers who would like a face to face meeting with an adviser and have less than a set limit in their accounts. 

· Telephone banking – there are charges incurred when phoning this service.

These are just a few of the “hidden” charges which we all probably encounter on a  regular basis, but are not necessarily aware.  So for the “free banking” myth to be used as an excuse for introducing yet more charges seems to be a very risky strategy for the banking sector. 

As they say in business, there is no such thing as a “free lunch” – perhaps the same applies to banking services, there is no such thing as “free banking”?