1994: Reality Bites – Ben Stiller
Virgin Money who took over Northern Rock have decided to charge for their current account. This will be at a rate of £5 a month. Virgin argue that there is no such thing as free banking. This is a marketing conundrum. Virgin are quite right of course that bank accounts have costs to the bank, but will the general public agree, when many other banks provide “free banking”. This is the nettle that most of us do not wish to grasp – a “something for nothing” world does not exist, yet it has been so long peddled in Britain that one wonders if the hallucinogenic has become so necessary to a credit addicted nation that few will pay the price for reality.
I’m for reality and am with Mr Branson, though with the million customers that Northern Rock have, if all stay with Virgin and have a current account, this would of course provide a nice return of £60m a year where previously Northern Rock had none. One might argue that this is what happens when you get someone with a business head running things. Those reluctant to pay for a current account do have options with other banks, not yet bold enough to charge.
However, whilst I do believe that a good business should be sustainable, in this instance, simply charging more whilst continuing higher charges on other bank products that has been used to cross-subsidise the cost of banking, must therefore be re-adjusted – namely the rate of interest charged. Retail Banks make money from “good customers” which really means those that have debt and maintain payments. Banks have a vested interest in selling debt (credit) to you and I, though sometimes you do wonder if even they appreciate this. So yes, let’s have a fair, sustainable banking system – but one that is a two-way street. Hopefully Virgin will offer fair and competitive rates of interest to both savers and borrowers, only time will tell.

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