By Elliot Wright, 9th March 2010
Virgin Money plans to offer consumers at risk of high overdraft
charges a better way of banking when it launches its new bank next
year, by charging a monthly fee on its current accounts.
The group said its current accounts will be more transparent and
will charge an upfront monthly fee to avoid hitting customers with
extortionate bank charges when they slip into an unauthorised
overdraft.
Most high street banks offer basic accounts for free but often
charge unauthorised overdraft fees of up to £35, plunging customers
further into the red.
Jayne-Anne Gadhia, chief executive of Virgin Money, said: "Most
people know there is no such thing as free banking. Banks have to
cover the cost of free current accounts with hidden charges such as
overdraft fees. We're definitely planning to charge for current
accounts and be transparent about it."
The group says that they have yet to decide what the charge
would be, but would be applicable to all accounts regardless of how
much customers deposit each month.
Peter Gerrard, finance expert at Moneyextra.com, said:
"It's great that Virgin is being innovative at a time when
most current and savings accounts remain stagnant in their
approach. Current accounts are one area where a majority of UK
consumers are reluctant to switch, so Virgin will need to make
their current account very appealing to encourage consumers to get
on board.
"This account like is likely to appeal to consumers who
regularly use their overdraft and get penalized by regular monthly
charges. However, anyone looking to take this account should weigh
up the costs between switching and stopping with their own current
account provider and managing their overdraft appropriately."