大象传媒

Not-so-free banking

• Robert Peston
• 16 Apr 07, 09:06 AM

Those who run our biggest banks frequently ask me why nobody loves them and their institutions. One reason is the kind of note that is being sent by NatWest to its customers about changes being made to charges for use of their debit cards outside the UK.

This note says that as of 5 June, the transaction charges for withdrawals of cash from ATMs and for shop purchases when abroad are changing. But it doesn't say what the charges were before or whether the impending changes represent an increase or a cut. Nor is there any explanation for why the charges are changing.

Can you think of any other service business that would alter their charges without trying to tell their customers why they were doing so? These days, even the power companies endeavour to make a case for their tariff changes.

To be clear, charges levied by banks when we use our plastic abroad are far from trivial. It's one of the hidden ways that the banks make proper money out of so-called free banking. For the big banks collectively, well over a billion pounds in revenue is levied from retail customers from charges on these non-sterling transactions with debit cards.

Depending on which bank you use and how much you spend when abroad, you can easily provide your bank with revenue from charges of 拢60 or so on a single trip. On my calculations, during a typical family holiday abroad, if you use your debit card for cash withdrawals and shop purchases totalling between 拢750 and 拢1500 on aggregate, you are likely to pay your bank anything from about 拢20 in charges to 拢120 in charges.

Anyway there seems to be great similarity in what the banks charge for using ATMs outside the UK but quite a lot of difference in what they levy for buying stuff in overseas shops with a debit card. For what it's worth, Nationwide seems to be the cheapest (since it doesn't levy any charges) and Halifax seems to be the priciest - though depending on how you use your debit card, other banks can cost you more than the Halifax.

I should also point out that I've not investigated whether all the banks charge an identically competitive exchange rate on these transactions. All the benefits of lower charges could be wiped out if your bank sold you dollars, euros or yuan at a worse rate than another bank would. But of course, when using your debit card at an ATM or in a shop, you just have to take the rate you're given, you can't shop around.

To return to NatWest, when a colleague of mine, Claire Mace, first approached its press office, she was told that there were no plans to change the debit card charges - even though the leaflets announcing the changes had already been sent out. Which again doesn't imply that this bank attaches great importance to explaining its tariffs.

Anyway, what the leaflet sent to NatWest customers says is that a transaction fee of 2.75% will be added to all cash withdrawals and shop purchases. And then there'll be a further 2% charge on cash withdrawals, subject to a minimum of 拢2 and a maximum of 拢5. On transactions in shops, there will be a separate flat fee of 拢1.25.

All quite complicated and confusing. Does that represent an increase or decrease in charges? Guess what, it depends how you use your card. The basic transaction fee is going up from 2.65%, but the other ATM fee is being reduced from 2.25%. However the flat rate fee for buying in shops is rising significantly from 75p per transaction.

The effect of all this is that from June if you withdraw 拢100 from a cash machine that will cost you 拢4.75 compared with 拢4.90 right now. But if you buy something for 拢100, that'll cost you 拢4, up from 拢3.40.

What it means is that if NatWest customers tend to use their debit cards for shopping when abroad rather than taking out cash, it will be quids in. Which sounds to me a bit like a price rise. What does it sound like to you?

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