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Is this the end of 'free' banking?

It is thought that about 1.75million people do not have a bank account and the Government wants to tackle this. Those ''financially excluded'' are thought to lose out as they might find it hard to find work with an employer who wants to pay them electronically into their account as well as many of the UKs utility firms offer discounts to people who can make regular monthly payments.

All the big banks offer a basic bank account in some form but refuse to openly advertise although the basic bank account they do offer is very basic given it does not let you get into debt as it doesn't have an overdraft facility or a cheque book, plus most of them will not offer a debit card either meaning that they can only really use the basic functionality of paying in or taking money out.

So their description as a ‘basic bank account’ is very apt as all they let you do is carry out basic banking functions such as paying money in via electronic transfer from an employer, or a cheque, as well as setting up direct debits and standing orders.

But while availability of these basic bank accounts is actually already widespread, access to them is not and this is put down mainly due to the applicant’s credit history or simply that customers eligible for a basic bank accounts aren't told of them or are rejected for various reasons.

However announcing their new initiative the Government wants to change the law to legally force banks to offer basic accounts unless ''there is a very good reason not to'', according to the Treasury department.

One Government officail said: ''This will mean, over the next five years, up to a million more people will have access to bank accounts - something essential in the modern world.''

One big question yet to be answered is that if the high street bank is not making money out of either their penalty charges or interest rates on overdrafts, how do they expect to cover the cost of this ‘new’ service and does it mean the end of free banking as we know it?

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