More on European bank charges

By Felix Salmon
September 23, 2009
SP, I've now found the study (149 pages, 1.5MB) examining bank fees across Europe. It makes for fascinating reading.


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Thanks to SP, I’ve now found the study (149 pages, 1.5MB) examining bank fees across Europe. It makes for fascinating reading.

Here’s one key graph:

bankcharges.tiff

On the y-axis is the annual cost of a checking account for the average individual; on the x-axis is the degree to which banking products are transparent and simple. (Simplicity and transparency are very highly correlated.) Basically, once transparency and simplicity reach a certain not-particularly-high point, the cost of checking is capped at a reasonable level. But where there is opacity, the sky’s the limit when it comes to how much banks can charge.

Incidentally, “checking” is now very much a misnomer in pretty much all European countries. In Belgium and Spain, the average household writes less than 3 checks per year, and fewer than one in three households writes any checks at all. At the other end of the spectrum, in Portugal the average household writes one check a month: anything more than that is considered “high usage”. I don’t know what the equivalent figures are for the US, but I’m sure that the number of checks written overall is at least a full order of magnitude higher than it is in the EU.

I’m also intrigued by these charts:

charges.tiff

The main thing I see here is lots of red and purple: basic annual and account charges. What that says to me is that banks in Europe don’t hide their charges in the form of overdraft fees and other things people don’t expect to incur: that in general European bank charges are much more transparent than those in the US. That’s a good thing, and it stops the poor from cross-subsidizing the rich, as happens in America.

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