Barclays has taken a first step in what is likely to be a radical change in the way banks charge for current accounts and, before long, for other services too. It is softening the pain for the minority of customers who frequently breach their overdraft limits but at a cost for the majority who do not.

Interest on balances in credit, albeit a niggardly 0.1 per cent, is being scrapped. And the interest rate on authorised overdrafts is to go up by more than two percentage points to almost 18 per cent.

The great majority of Barclays’s 11 million current account customers are going to be a little bit worse off. The winners will be the poor, those with absolutely no savings, who fail to keep within their limits as pay day recedes, and the incompetent, who don’t get around to juggling their finances efficiently. For them, the blizzard of fees that used to pile up as they zigzagged in and out of unauthorised overdraft territory will be sharply reduced.

Two things seem to be driving the thinking at Barclays and other banks — the desire to proclaim they still offer “free banking” and the need to keep competition regulators at bay. Of course, there has never really been free banking. Banks simply make their money through the interest margin rather than through explicit fees. But the illusion is a powerful marketing line in the battle for customers, a battle now being joined with renewed ferocity as bankers rediscover the virtues of a loyal retail depositor base (as distinct from fickle wholesale markets).

Keeping competition watchdogs at bay is also becoming more important. The issue of whether unauthorised overdraft fees are unfair is now heading for the Appeal Court but there is little doubt that regulators want to see charges more accurately reflect the underlying cost of services. They want to remove the huge cross-subsidies that distort banking tariffs.

That has already meant that the generous initial offers from card companies, such as up to a year’s free credit on balance transfers, have been abandoned after the crackdown on excessive default charges. It is now leading to rule-abiding current account holders getting less of a cross-subsidy from unauthorised borrowers. And, if the Competition Commission rules as expected, it will soon lead to all kinds of borrowers paying a bit more as regulators take action against mis-selling of payment protection insurance, which has enriched banks but also enabled them to offer cut-price borrowing rates.

Regulators are right to crack down on pricing that unfairly penalises the poor and the financially ignorant. But their crusade is not going to be popular with the better off and better-informed majority.

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