New Virgin account could benefit consumers vulnerable to bank charges

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."