Business banking costs higher NOT lower!

High Street business banking has become more expensive since the Competition Commission published its recommendations to the main business banks three years ago.

Business Moneyfacts' latest current account survey shows that recommendations designed to make business banking less expensive most business accounts from the 'big four' now cost small businesses more every month.

Business Moneyfacts Editor Nikki Cann comments, "When we published our first tables three years ago, we looked at three different business types and listed the top six cheapest accounts for each. Of these 18 cheapest accounts eight were from the 'big four'. In our latest survey, three years since the Competition Commission rules were supposed to make business banking cheaper for big four customers, only three of the top 18 were big four accounts.

"We also looked at the accounts that did well three years ago to see how they had performed this year. Many of the cheaper, smaller business accounts have been withdrawn and replaced with alternatives and some transactions have become more expensive."

On average, business banking from the big four works out more expensive by about £10 every month. The Office of Fair Trading will soon be reviewing how successful the Competition Commission's rules were in reducing business banking costs for small and medium-sized companies. The results of this survey suggest the answer to that question is, not very.

Back in 2002 The Competition Commission found that the big four banks were making their customers pay excessive charges and recommended that they should either offer their customers free banking or pay credit interest at a minimum rate of 2.5% below base rate.

Many of the big banks chose to pay interest on credit balances at the minimum recommended level of 2.5% below base rate. As interest rates are at a forty-year low this only equates to 2%. A business would need to keep thousands on an account before it could offset any charges.

13 October 2005 © Moneyextra.com

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