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30 Oct 2020

HSBC could start charging for current accounts: what are your options if it happens?

HSBC could charge standard account holders but basic accounts will remain free

HSBC has said it could start charging for basic banking services in some countries, meaning millions of UK customers may have to pay for their current accounts.

The bank says it's considering charging for products like its standard current accounts, which are currently fee-free in the UK, after suffering profit losses as a consequence of the coronavirus crisis.

However, basic bank accounts will continue to be free of charge.

Here, Which? looks at why the bank may introduce charges for account holders and your options should it happen.

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Why is HSBC considering charging customers?

The announcement comes as HSBC reported a 35% fall in pre-tax profits for the three months to the end of September. Its profits made before tax amounted to $3.1bn (£2.4bn), down from $4.8bn (£3.7bn) at the same time last year.

With interest rates at an all-time low, the bank is struggling to charge more for loans to borrowers than it pays out to depositors.

HSBC's income could shrink even further with the Bank of England (BoE) now considering moving to a negative base rate.

With negative interest rates, banks could be charged by the BoE to hold cash. So banks like HSBC may have to impose charges to boost revenue.

An HSBC spokesperson told Which?: 'Whatever happens with negative interest rates, we're committed to continuing to provide basic bank accounts with fee-free standard operations, but always keep under review the pricing for our standard current accounts and associated services.'

The change would mean charges may be imposed on its non-basic current accounts like its Advance and Premier accounts, which are currently free to UK customers.

The bank has not yet confirmed it will definitely go ahead with this, nor has it specified how much charges could be.

It will set out further details on increasing fee income when it reports full-year results in February, the bank told Reuters.

How many could be impacted?

HSBC is one of the largest providers of current accounts in the UK.

Figures from the bank released last year show it holds around 14% - or over 9.8m - of the UKs roughly 70m current accounts, meaning a substantial amount of customers would be affected by a move to start charging for accounts.

GarethShaw, Head of Money at Which?, says: 'Bank customers in the UK are used to free banking as long as their current account is in credit - so it would be a huge and risky move for one of the major banks to start charging for an ordinary account.

'The danger for consumers is that if one of the big banks opens the door to charging fees, the others may follow suit - but competition for customers would hopefully dictate that there will be a range of attractive free accounts available for the foreseeable future.'

Will other banks impose charges?

We contacted 12 UK banks to see if they are looking to impose charges for account holders.

At the time of writing, only Metro Bank and the Co-operative bank had responded.

Metro Bank says it has no current plans to introduce fees, and it will keep product pricing under review and continue to monitor market conditions. The Co-operative Bank says it has no intention to introduce charges at this time.

We'll keep you updated if any other banks announce plans to impose charges. If the base rate moves into negative territory, it's likely that more banks could consider it.

What can I do if my bank starts charging?

If your bank does end up imposing charges to hold an account, you can switch to a different provider. The process is pretty easy, and relatively hassle-free.

But you should only be doing this if you can find a better deal elsewhere and are generally unhappy with your bank - you never know, you could move banks and they end up imposing charges too.

If you do want to switch, most banks have agreed to use a switching service, called the Current Account Switch Service (CASS).

If you want to check which banks and building societies are participating, you can search by name on its website.

Our guide will take you through the steps, including how to apply for your new chosen account, choosing your switch date and information on what to do if you have problems with the switch. You can also watch the video below.

Will I be able to use a basic bank account?

Since 2016, major banks have been required to provide free basic bank accounts. They offer basic facilities for receiving money and settling bills, without overdraft facilities.

The nine firms legally bound to offering free basic bank accounts include:

  • Lloyds Banking Group (which includes Halifax and Bank of Scotland)
  • RBS (which includes NatWest and Ulster NI)
  • Barclays
  • HSBC
  • Santander
  • Nationwide
  • TSB
  • Clydesdale and Yorkshire Banks
  • Co-operative Bank

However, as it stands, many providers only make basic accounts available to people who fail to qualify for standard accounts.

These accounts exist to ensure that major banks have free-to-use accounts for the most vulnerable in society, who for example, may not qualify for standard current accounts because they have a poor credit history.

You can contact your bank via telephone, or use its app to see if they'll allow you to downgrade your account. You may be able to visit a branch if you prefer, but banks have put in more stringent measures on branch visits due to coronavirus restrictions.