Cash: a few questions

The cash dispenser has largely replaced the cheque book as our primary financial instrument. Banks have cajoled us into using their machines, because it cuts their branch and paper costs to shreds.

But having trained us to love new tech, they look set to charge us for the privilege. From Monday, HSBC and its direct banking arm, First Direct, will charge pounds 1 every time a customer uses a card in a Link machine and pounds 1.50 for every transaction at any bank other than their own, NatWest, Clydesdale or Ulster.

A week later Abbey National will join them. The Abbey's move is probably the cheekiest. Having introduced an account specifically designed to keep customers out of the branch, by fining them pounds 1 each time they step inside, from 12 July it will make its customers pay pounds 1.50 every time they use a cash machine not owned by the bank .

Meanwhile, last month, Lloyds introduced a similar fee for customers using any dispenser other than one owned by TSB, Barclays, Bank of Scotland or Royal Bank of Scotland.

And the Woolwich is siting up to 1,200 machines at what it terms "convenient sites", which will have a pounds 1 fee. Some of these will be in traditionally "no go" positions for an ATM, such as nightclubs. Others will be in late- night shops. A spokesman said: "These machines will be placed in locations where it is not economically viable to install one under normal conditions, but where they may be helpful to customers, who will be happy to pay a fee for the convenience. In America it is very common to pay a fee to use a cash dispenser. People expect it."

But in America, customers expect to pay for all their services. Free banking does not exist, as it does in many parts of Europe. And this is the crux of the issue. While all the main UK banks swear passionate allegiance to the very British concept of "free while in credit" banking, costs are inching up on several fronts.

Here again one should give credit to the Abbey National for taking the lead. Apart from its branch and cashpoint charges, it has introduced a pounds 5 fee to pay bills at the counter.

If you use a Woolwich account excessively ("excessive" translates as 20 times a month) you will be charged pounds 1 per transaction. Even if you ask Barclays ever so nicely for an overdraft, it will still cost you pounds 5 per month on top of interest. Take the money and run and you'll be stung by a pounds 20 monthly fee as well.

If you expect some kind of "personal service" at NatWest, bankspeak for an occasional conversation with the manager, then it will cost you pounds 10 monthly.

All this is to name but a few. Most high street banks have accounts for which you pay for additional services, which most customers don't need and many don't realise they are paying for. Yet all the giants are adamant that they will continue to offer a basic banking service free because this is what a hard core of customers want.

Tony Gibbons, the head of current account marketing at Lloyds, says: "We have more than one million customers who tell us they are willing to pay a fee. They want more than the basic account. But we couldn't do away with free banking. We wouldn't get away with it."

Abbey National's Mark Murphy adds: "We will move towards greater transparency and less cross-subsidisation of one customer by another. The expansion of new technology, with 24-hour telephone helplines, Internet banking and, later this year, TV banking, means that accounts will change. But the basic free-in-credit deal will always be around."

Which is very reassuring, until you look at just what your account is costing you. Last month stockbrokers at merchant bank Dresdner Kleinwort Benson analysed the competitiveness of various institutions for the 12 months after March 1998.

Although the findings are a little out of date because some institutions have moved rates since, they still make interesting reading. They studied the borrowing and investing facilities available, and found the two big mutuals, Standard Life and the Nationwide at the top of the table. The big quoted banks, meanwhile, were exposed as already offering among the rawest deals on the high street. So much for free banking.