Millions of bank customers hit by rises of up to 20% in account fees

More than four million people across the country have been persuaded to take out 'package accounts' on the basis that monthly fees provide a series of perks.

These are current accounts that charge a monthly fee but include a range of additional services such as free travel insurance, will writing and free breakdown cover.

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Consumer group surveys have questioned whether the perks provide value for money.

Now, three of the biggest bank brands on the High Street are imposing even higher monthly fees on what the banks like to call 'Added Value Accounts'.

Last night, the groups denied the move had anything to do with their recent loss of a High Court test case over unauthorised overdraft charges, saying instead that the rates had simply not been increased for a number of years.

Lloyds-TSB is put up the fee on its Gold and Platinum accounts by £2 a month. The Gold account charge will rise to £12 a month and the Platinum one to £17.

Assuming the bank has two million signed up to these deals it will increase annual income from these charges by a staggering £96million a year.

Royal Bank of Scotland(RBS) and Natwest, which is owned by RBS, are introducing similar increases.

RBS and NatWest are increasing charges by 95p a month on the Royalties and Advantage accounts to £12.95.

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NatWest customers with an Advantage Private account will see their monthly fee rise by £1.40 to £19.95 a month. Assuming the group has two million signed up to these accounts, it will be raking in an estimated £30 million a year extra.

Other high street banks and building societies are expected to follow suit.

The increases come at a time when the banks face a crackdown by the Office of Fair Trading(OFT) and the courts on unfair overdraft penalty charges.

It seems likely that charges of £25-£39 for busting an overdraft limit or bouncing a payment, such as a cheque or direct debit, will be capped.

There are signs that the banks are moving to counter the impact of such a cap on their income by pushing up other charges and interest rates.

This 'waterbed effect' occurred following an earlier move by the OFT to cap penalty fees on credit cards at £12. There has also been concern in the past that many thousands of people have been switched to these charging accounts without their consent.

Some finance industry leaders have indicated that the banks could begin to impose monthly fees on millions of customers who hold a current account.

There is a suggestion that people who not well off, including pensioners, could be first in the firing line for these charges.

This is because this group do not pay large sums into their accounts each month. This means this group do not provide a lot of cheap money for the banks to use to lend out at high interest rates.

Which? personal finance expert, Doug Taylor, said: "We have taken the view in past that unless at least two of the features in a package account is used regularly by a consumer then they are likely to offer poor value.

"Increasing the prices may mean that they offer even less value for money.

"We would ask consumers to question whether they are getting value for money."

Mr Taylor said it would be wrong for banks to react to the OFT action on overdraft charges by imposing account fees for the less well-off.

"Any attempt to impose charges on low income households would drive a coach and horses through the Government's efforts to increase financial inclusion and access to financial services," he said.

The banks denied the increases in charges were a reaction to the OFT action.

Lloyds said the charge is going up because it has enhanced the value of the package. It is offering a service to allow customers to keep copies of all the numbers stored on their mobile phones and is increasing the value of mobile insurance cover to £2,000.

RBS/Natwest said the 'modest price rises' fee reflects the inclusion of new benefits in their current account package.

The new features include improved car breakdown cover, enhanced mobile phone banking, better travel insurance and a facilty to get money out of a cash machine without a card. The user is given a special code to take out up to £300.