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Bank to launch 'fee-free' account

11:59am Thursday 19th November 2009

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Spanish banking giant Santander is set to launch an assault on the current account market with the introduction of a fee-free account available to mortgage customers.

The Zero Current Account has no authorised or unauthorised overdraft charges, it does not levy fees for payments that bounce, while customers will also not be charged to make cash withdrawals or purchases abroad.

The account pays interest of 6% on balances of up to £2,500, providing at least £1,000 is paid into the account each month, for the first year, after which interest falls back to 1%. Interest on overdrafts is charged at 12.9%.

The group, which has a 13.5% share of the mortgage market, said it was keen to convert its two million Abbey mortgage customers into current account ones in order to take on the big four clearing banks in this area.

It currently has 400,000 mortgage customers who have a current account with it across all of its brands, including 350,000 who bank with Abbey.

It is also hoping the lure of fee-free banking will help it to grow its mortgage market share.

But it denied that the timing of the announcement was linked to the current High Court test case on unauthorised overdraft charges.

The Supreme Court is due to give its verdict on the case next Wednesday, after the banks involved, including Santander, appealed the High Court and Court of Appeal ruling that the charges do come under the scope of the Office of Fair Trading.

If the Supreme Court finds against the banks it will pave the way for a further hearing to decide whether the charges are fair and, if not, what a fair charge would be.

Antonio Horta-Osorio, chief executive of Santander UK, said: "Santander is uniquely placed amongst UK banks to change the way it does business, and our new approach is one based on simplicity: the more business you do with us, the more we will offer you in return."

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