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What the end of free bank accounts means for you

Illo
Illo

Banks have warned they could start charging current account customers as profit margins remain wafer thin and the Bank of England mulls negative interest rates.

In its financial results, HSBC said that it could be forced to charge millions of account holders a monthly fee after posting a 36pc fall in profits.

The firm's Ewen Stevenson said: "We will have to look at charging for basic banking services in some markets, because a large number of our customers will be losing us money.”

An HSBC spokesman said it was committed to offering a free account but warned this would be "basic". They also said it would constantly review the cost of any other current accounts it charged for.

Experts have warned more banks could follow suit. This would mean a sea change for consumers who have have known nothing else other than free current accounts. Telegraph Money takes you through the key questions.

Why are banks going to charge for current accounts?

Earlier this month the Bank of England wrote to lenders asking them to get prepare for negative interest rates. In this scenario banks would be charged for holding deposits with the country's main Bank, and in turn could start charging savers and current account customers to avoid losses.

Current accounts that cost are not new to Britain, but are in the minority. Charging accounts tend to offer other services such as higher interest rates, more favourable exchange rates or cashback deals.

Of the 58 standard current accounts available to British customers, some 15 currently have a charge. The most expensive is a £10 monthly charge for Santander's Choice Current Account.

Some lenders offer more "premium" accounts that include add ons such as insurance and car breakdown cover. Bank of Scotland's Platinum account is the most expensive, charging £21 per month. Monzo has said it will launch Monzo Premium, a £15 per month bank account that offers a range of insurance deals and a metal card.

Katie Brain of Defaqto said: "We are seeing a change and if HSBC were to take the plunge and charge customers for current accounts, then others may follow."

Could savers be charged?

Savings rates are currently languishing at rock bottom levels but there is the potential for them to sink further if the Bank Rate turn negative. Some banks in Europe already charge savers a fee to hold savings with them while offering 0pc interest.

But Ms Brain said it was unlikely that savers would see charges introduced. "If anyone will be charged for holding savings with a bank it’s likely to be those with very large sums of money, in the hundreds of thousands of pounds," she said.

"It’s unlikely customers with smaller deposits would be charged. But I can’t see savings rates going up anytime soon so considering a fixed rate savings account might be a good idea."

Will your bank continue to offer free current accounts?

If the larger banks start to charge for current accounts then some of the country's smaller, newer and digital-only banks could provide an alternative.

However, consumers would have to give up on in-branch services for the digital-only brands.

Starling and Revolut spokesman said the banks are committed to keeping current accounts free. Metro Bank, a newer lender that has branches in some cities, also said it also had no plans to introduce fees for its current accounts.

However, the spokesman added that the bank would keep its pricing under regular review and “continue to monitor market conditions”.

Monzo said it had no plans to change its model, where it offers a free account but customers can sign up for a paid account if they wish and get additional services.

Do you have any concerns or questions about being charged for a current account? Let us know in the comments below.