Let's make one thing clear...there is no such thing as free banking!

All of us pay for our current accounts in lots of different ways.

In addition to penalty charges for such things as exceeding overdraft limits, we pay interest on overdrafts; get poor levels of interest on balances in credit; pay for some services directly (e.g. bank drafts), and pay commission on foreign currency and get poor exchange rates.

We also take out all sorts of other products with our banks such as loans and credit cards; effectively borrowing our own money at much higher interest rates than we receive in credit.

It's really not a great idea to buy insurance, cards, loans, mortgages or anything else from your bank, because they charge a hefty price for your laziness. It's important you take the time to compare these products online as it's much cheaper!

The Office of Fair Trading (OFT) is now expanding its penalty bank charges investigation to look at all existing charges. It will look at the consequences of its actions if it manages to stop banks charging penalty fees.

It is likely that the OFT is concerned about offending the millions of us current-account holders who never pay penalty bank charges. If penalties are reduced or quashed, we will have to start paying more for our own accounts, so that the banks can maintain their profits.

The OFT can certainly justify the wider investigation, because part of its remit is to ensure that there is a healthy competition between businesses in the same industry. But they will be concerned that the banks will use any ruling as an excuse to increase their profiteering! (not that they need any excuses mutters Finance Physician)

Unless it comes up with something innovative, the OFT have two options on bank charges: warn banks to cap them (as it did with credit cards) or take the banks to court over them (like Tom Brennan is currently doing)

The OFT will be hoping to come up with a win-win solution where bank charges are quashed or greatly reduced, the overall cost of banking doesn't rise, and the costs of banking become more transparent. (All the staff here think that achieving all this is virtually impossible!)

If banks have to reduce their penalty fees and are forced to be transparent about their existing charges, they'll simply come up with all sorts of new ways to charge people! (although I think we all knew that already!)

The genuine fear is that banks will do this anyway, as, one way or another, penalizing people for bank charges will become a dead end for them.

Already we have seen more current accounts introduced that charge monthly fees. first direct charges many of its users £120 a year for paying in less than £1,500 per month.

Over the next few years, it's likely we will see the end of free banking as the banks pushes more and more of us into accounts with fees. It'll be a slow process, as no bank will want to be seen as the first to say 'You're all paying fees now'.

It is likely to come down to choosing between current accounts that charge monthly fees and those which are free to have, but charge you for each service you use, such as withdrawing money, transferring funds and cashing cheques. Then there will be accounts that combine both.

We can also expect accounts that pay virtually no interest in return for lower monthly fees or service charges. Plus, they will push harder their packaged accounts, which include things like travel insurance and discounts in selected retailers (but are of very dubious value!)

Furthermore, the banks could use all this as an opportunity to earn more profits than they were when they were penalising the minority on a regular basis. (They may rue the loss of a small portion of their previous profits, but they will not be scared for their future ones!)

Despite all this, its fair to say that penalty charges should be withdrawn and those of us that have been penalised should be reimbursed.

The penalties are unlawful, so people shouldn't be penalised. It is wrong that a minority pay thousands to subsidise the accounts of other, wealthier people.

The matter of effective competition keeping banking costs down should be looked at entirely separately.

We may hope this investigation makes banking costs more transparent, but, even if the costs do become clearer, will that make us richer?

Matron, (who knows a few things) thinks that answer to that is probably no...