Consumers 'face £300 bank charges'

Financial website moneysupermarket.com said pay-per-transaction banking could be introduced in the UK in place of the current penalty charges system, which is being investigated by the Office of Fair Trading (OFT).

It said under the new system, which is favoured in many countries, people could be charged an average of 32.9p for every direct debit they had and 34.2p for standing orders. Withdrawing cash would cost people around 23.9p, a card transaction would be 53.8p and writing a cheque would cost an average of 44.7p. On top of this people could expect to pay a monthly banking charge of £4.13.

It said under this model the average person would face annual account charges of £294.63, while someone who carried out a high number of transactions could pay more than £500 a year.

Unsurprisingly, only 1% of consumers said they would be happy to be charged for every transaction they made. Instead 8% said they would rather pay a monthly or annual fee, while the majority of people would prefer to continue with the current system of free banking but high penalty charges for people who breach their overdraft limit or bounce cheques.

Kevin Mountford, head of current accounts at moneysupermarket.com, said: "We could well see the system prevalent in Western Europe, North America and Australia, where there are a certain number of free transactions and then you pay for any additional ones.

"We have already seen some providers abandon the concept of free banking by steadily introducing a bevy of charges on their less profitable customers."

He said the introduction of transaction charges would drastically change consumer behaviour, as it has done in other countries, with people used to making multiple card transactions or cash withdrawals likely to change their spending habits to reduce costs.

The OFT is currently taking a number of banks to court to establish whether the high penalty charges they levy are fair.

But Mr Mountford said: "At the moment, free banking is possible largely because of the number of people who are hit with fees and charges. The OFT's clampdown on this, together with politician Andrew Tyrie's call for more transparency in charging, could well be moving us closer to a pay-per-transaction system - but one that Britons will resist."