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Bank to launch 'fee-free' account
19 Nov 2009Spanish banking giant Santander is set to launch an assault on the current account market with the introduction of a fee-free account available to mortgage customers.
The Zero Current Account has no authorised or unauthorised overdraft charges, it does not levy fees for payments that bounce, while customers will also not be charged to make cash withdrawals or purchases abroad.
The account pays interest of 6% on balances of up to £2,500, providing at least £1,000 is paid into the account each month, for the first year, after which interest falls back to 1%. Interest on overdrafts is charged at 12.9%.
The group, which has a 13.5% share of the mortgage market, said it was keen to convert its two million Abbey mortgage customers into current account ones in order to take on the big four clearing banks in this area.
It currently has 400,000 mortgage customers who have a current account with it across all of its brands, including 350,000 who bank with Abbey.
It is also hoping the lure of fee-free banking will help it to grow its mortgage market share.
But it denied that the timing of the announcement was linked to the current High Court test case on unauthorised overdraft charges.
The Supreme Court is due to give its verdict on the case next Wednesday, after the banks involved, including Santander, appealed the High Court and Court of Appeal ruling that the charges do come under the scope of the Office of Fair Trading.
If the Supreme Court finds against the banks it will pave the way for a further hearing to decide whether the charges are fair and, if not, what a fair charge would be.
Antonio Horta-Osorio, chief executive of Santander UK, said: "Santander is uniquely placed amongst UK banks to change the way it does business, and our new approach is one based on simplicity: the more business you do with us, the more we will offer you in return."
The group has 25 million customers in the UK and it is keen to cross sell products to these people.
The new current account will be available to Abbey mortgage customers from January 11 next year, to coincide with its rebranding of 1,000 Abbey and Bradford & Bingley branches.
The offer will be extended to Alliance & Leicester mortgage customers during the third quarter when A&L branches are also rebranded Santander.
The group said the Zero account was the first of a "series of initiatives" it was planning to "radically change" retail banking in the UK.
Kevin Mountford, head of banking at moneysupermarket.com, said: "It really is great to see innovation in the banking market, which has been somewhat devoid of new ideas whilst the OFT case regarding unfair charges has been hanging over the industry.
"Santander has clearly taken heed of broad concerns around charging structures and looked to wipe them all away in one fell swoop.
"Across all financial products consumers value simplicity, honesty and fairness, and this delivers all three in abundance."
But he warned consumers not to be swayed into switching their mortgage to the group on the basis of the current account, as the fees they could incur for doing this could wipe out any savings they made through the new account.
Reader views (1)
I have banked with Abbey for many years and have noticed a change for the better since Santander took over. Previously Abbey would deduct the direct debits, etc. from your account before crediting payments. In the millisecond between debits and credits that your account was overdrawn you would be charged an overdraft fee. Also Abbey would take 3 days to move money between accounts within Abbey. Santander have improved the situation with instant transfers between accounts and less draconian charges. I would really like to see a Euro current account made available at High Street branches with fee free transfers to European Banks. This is long overdue.
- Dannyp, Egham, 20/11/2009 08:35
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