Bank Charges

Press, Volume CVII, Issue 31501, 16 October 1967, Page 12

Bank Charges

The proposed new system of charging bank customers for the service provided is more equitable than the present one. The bank customer who draws many cheques in a month but pays no inland exchange is, in effect, being subsidised by those customers who pay inland exchange. The abolition of inland exchange and the substitution for it of charges proportionate to the “ activity ” of individual accounts will remove this anomaly; and inland exchange in these days of swift and reliable communications is certainly an anomaly.

For the great majority of the banks’ customers, including nearly all holders of private accounts, the main effect of the new system will be to increase their annual fixed charge from $2 to $2.60. They will, however, pay no inland exchange on cheques drawn or received. Commercial travellers, farmers, and business firms such as mail-order houses will benefit most from the abolition of inland exchange. Business firms with big overdraft limits may find the J per cent charge on unused overdraft facilities an incentive to reduce their limits.

The charges now proposed are similar to those announced in February, 1965, but abandoned after protests by organisations claiming to speak for the holders of small accounts. The banks’ case for a revision of the method of charging their customers is as sound today as it was nearly three years ago. The then chairman of the Bankers’ Association (Mr J. G. Souness) said that bank earnings were expected to rise no more than 5 per cent. His successor (Mr John Mowbray) says the new system “has been carefully designed not to increase bank “ revenue ”.

In other words, the banks are proposing to alter their system of charges so as to spread the burden of costs more equitably among their customers. Any customer who objects to a modest increase in his bank charges is arguing, in effect, for a continuation of present anomalies which amount to a subsidised service for himself at the expense of some other customer.