Where are the new basic bank accounts?

Credit: D K Grove/Shutterstock.com

The headline feature is that the account isn't subject to fees when customers go overdrawn or an attempted payment fails - making everyday banking truly free for the majority of users.

Account holders will also find they're not limited to particular cash points or branches when making withdrawals or deposits.

But under the terms of an agreement made between the Government and nine banking groups and building societies last year, there should be far more basic accounts offering exactly the same features by the end of the year - so where are they?

Who signed up?

As well as dropping charges for refused payments and temporary overdrafts, the agreement means each provider's basic account should be as visible as their standard and premium accounts.

Holders must be issued with proper payment cards that can be used in all the same places as a standard debit or credit card, rather than a cash card that can only be used at (certain) ATMs.

The nine groups that signed up to the Treasury agreement are:

• Barclay's
• Clydesdale Bank / Yorkshire Bank
• Co-operative Bank
• HSBC
• Lloyds / Halifax / Bank of Scotland
• Nationwide
• The RBS Group: NatWest, Royal Bank of Scotland and Ulster Bank
• Santander
• TSB

Some have simply introduced their new basic accounts without announcement: HSBC's doesn't look much different from their old Basic Current Account - but the updated Terms and Conditions explain that they "won't charge any overdraft interest or overdraft fees".

They and Nationwide are providing new account holders with Visa debit cards that, like any other debit card, can be used online, over the phone and in shops - and abroad, although users will be charged for transactions carried out in a foreign currency.

Barclays have also quietly updated their basic account, removing the £8 a day charge for unpaid or failed transactions. Santander say they'll try to stop payments if there isn't enough money to cover them, but they won't charge customers if the payment goes through.

At the time of writing, however, TSB are still saying that basic account holders will be able to bank free "as long as you're in credit".

Other banks such as Lloyds and RBS are also saying they'll charge account holders if they have to refuse to make a payment because there's not enough money in the account to cover it.

A basic history

By law, all banks have to offer a basic account - somewhere to put money into and make payments out of - but until last year's agreement, many providers did little more than that.

Until recently several banks limited the ATMs their basic account holders could use - which the Payments Council has argued only increases financial exclusion.

Although they didn't restrict ATM access, in 2012 the Co-op stopped accepting applications from undischarged bankrupts, making Barclays the only option for people trying to start over without using a more expensive option like a managed account or prepaid card.

The main reason for this reticence on the part of the banks and building societies is that basic bank accounts cost them dearly - £300 million in 2014, according to the Government.

One of the only ways they can make up for that expenditure without passing it onto other customers is to charge fines and fees.

Research by the Financial Inclusion Commission (FIC) suggests that among those who have recently opened a basic account, around half have incurred penalty fees, ranging from £8 to £35.

What's more, 26% have ended up worse off as a result of opening their account, having incurred "more penalty charges than they have gained in savings".

Wait and see?

Next year the EU Payment Accounts Directive comes into force, under which everyone must have access to a basic payment account with a full payment card.

Free-if-in-credit banking is actually somewhat unusual internationally, so the Directive states that basic accounts must be either free or offered for "a reasonable fee" - and that "any default fees charged must also be reasonable".

It looks likely that all the signatories to the Treasury agreement will meet these conditions at least.

The new basic bank accounts are likely to cost their providers even more to administer - and it's therefore understandable, if not admirable, that only one has drawn attention to their compliance with the deal made with the Treasury.

But the fact remains that with only weeks to go before all the new basic accounts were supposed to be available, and as prominently as their providers' other products, they seem to be rather lacking.