Whose cashpoint is it anyway?

The cash machine network was hailed as a great advance in the 1980s. But now the banks are using it to fleece us all

When Barclays installed the UK's first 24-hour cash machine at its Enfield branch in 1967 there were plenty who doubted whether it would catch on. There are still some of the population - around 25 per cent, according to a recent survey - who won't go near the things, but they are almost exclusively older people. Meanwhile, a whole generation has grown up relying on free access to cash from the hole-in-the-wall.

Barclays has scored another cash-machine first this summer, with its announcement that from next month it will charge pounds 1 to every "alien" who inserts a card into one of its automated teller machines (ATMs). The resulting row among the banks threatens the future of the Link network, the consortium of 33 banks and building societies which ensures us free access to the UK's entire network of cash machines.

The Nationwide building society is planning to sue Barclays unless the plans are withdrawn by next Thursday. Barclays is defiant, saying it has done what is sees as the right thing for its own customers, who can now use almost every cash machine free. Peter Duffy, the bank's head of screen banking, came up with the idea: "Accusations of profiteering are ridiculous. This will cost us pounds 6m next year. We have been saying for quite a long while that we should be more transparent and now we are taking a lead."

But it's a selfish act, and has upset the delicate balance of the Link network where every bank effectively cross-subsidises others. And if Barclays finds itself cast out of Link, its customers won't be so grateful for their range of free machines - they will effectively be returned forcibly to the days of the late Seventies and early Eighties, when only the old building societies' machines were in the Link network and the big banks had few reciprocal agreements. Most of us can remember desperate late- night searches for a cash machine we could use. It's a world away from today's 24- hour society, but if other banks follow Barclays' lead, the future of the Link network agreement will be under threat.

Yet the cash-machine row is a convenient smoke-screen behind which most of the other banks can hide their equally shameful practices. They are upset with Barclays because it has decided to charge pounds 1 to other banks' customers - rather than its own. The latter practice, known as a "disloyalty fee", has quietly been gaining ground over the summer, with several big banks imposing new and hefty charges on their own customers who stray to other ATMs.

Barclays may have taken the flak, but it was HSBC which really kicked off this round of tit-for-tat charging. This battle of the banks has developed into a sorry tale of pettiness and corporate wrangling that is likely to cost almost every customer an extra pounds 70-pounds 300 a year. In contrast it will make (according to banks' own estimates) around pounds 1bn annually for their already fat profits.

HSBC's first move was to write to its customers and tell them they would be charged pounds 1 from mid-July each time they used an Abbey National cash machine, which had previously been free. This almost halved the number of free machines for HSBC customers, from 11,000 to just 5,800.

Abbey National is never shy of making unpopular moves. In August it became the first bank to charge customers pounds 5 to pay bills at its branch counters. Abbey also told its customers that they would be charged pounds 1.50 for getting cash outside the bank's network (although, perversely, Abbey customers can still use HSBC machines free). Earlier this month, Halifax also started to impose so-called "disloyalty" fees on its customers.

The whole system is a confusing mess, and none of these charges are shown when you use a cash machine - your cash card is likely to work in almost all machines, because it carries the Link symbol.

Unless you obsessively remember which ATMs are free to you - and as we've seen this summer, that seems to be a frequently changing list - then you may get hit with hefty cumulative charges.

You can see why Barclays thought it had got round this confusion when it came up with a new way of charging: the pounds 1 charge will be flagged up on screen when an "alien" card is inserted into the ATM. This practice is widespread in the USA, where customers are routinely charged $1 or more for using ATMs belonging to other banks, or machines located in convenience stores or garages.

It has caused uproar here because it raises the prospect of "double-charging". We may not complain about Abbey National charging us pounds 1.50 to get pounds 10 out of a Barclays machine (possibly because we don't know about it). But we are surely going to kick up a fuss when we realise that it's costing us pounds 2.50 for a quick cash fix.

All this explicit charging shines an unpleasant torch into the dark corners of current banking practice. They are quietly fleecing us of millions of pounds - it costs your bank 30p whenever you use another machine in the Link network. If your bank is charging you pounds 1.50, that's a fairly neat profit.

Unsurprisingly, the most vociferous complaints about Barclays are coming from the three institutions which have refused to make money from their customers' use of other cash machines: the Royal Bank of Scotland, the Co-operative Bank and Nationwide BS. They have pledged free access for their customers, but are powerless to prevent Barclays charging its pounds 1 fee.

What the banks don't seem to have realised is that this very public row is also very damaging to their expensively maintained public image. Time and again they come up with charging structures which seem to violate the fairness and openness being demanded by the Government's banking review, conducted by the ex-telecoms regulator Don Cruickshank.

They are also under pressure to offer banking services to the 20 per cent of the population who are normally excluded from mainstream banking. A Treasury report on financial exclusion, due next week, will demand that banks offer current accounts which don't allow the user to write cheques or overdraw. These users would rely heavily on cash machines - and when money is tight, a pounds 2.50 charge to withdraw pounds 10 in cash is little less than extortion.

Banks complain that they get a bad press, but then rely on the power of advertising and customer apathy to keep their profits piling up. If you don't like what your bank is doing, change to a better one.

HOW TO DUMP A USELESS BANK

LEARN to complain more effectively. If your bank has done something wrong, give it a chance to put it right. Put your complaint in writing, and follow the bank's in-house procedures. The new superwatchdog, the Financial Services Authority (FSA), has a guide to making an effective complaint against a financial company. Call 0800 917 3311 or pick it up from the FSA website at www.fsa.gov.uk.

If you hate your bank and want to change, don't take a British attitude and assume all banks are the same. It's become much easier to change your bank account and although it is time-consuming to change all your direct debits and standing orders, most banks will do the legwork for you. All you have to do is sign the forms.

Some banks score more highly than others in customer satisfaction surveys. First Direct, the Co-operative Bank and Royal Bank of Scotland do consistently well in surveys of customer service and the products they offer. If you rely on cash to buy everything, the RBS, Co-op and Nationwide have refused to impose fees for taking cash from other banks' machines. The Nationwide's FlexAccount gives you free access to all cash machines.

If you care about ethical banking, try the Co-operative Bank. It doesn't have many branches but has a sophisticated telephone and internet banking service. Or opt for a building society current account. Because 75 per cent of a society's loans have to be secured on residential property, you won't find them lending cash to dodgy regimes or arms dealers.

You are almost certain to run into expensive, poor-value-for-money products when you start to buy insurance, investments and pensions from the bank. Which? magazine has compared the value for money of eight big banks and building societies and found the worst offenders were Barclays and NatWest. Which? described Barclays personal loans as "nothing short of a rip-off".

The financial advisers inside banks can only sell you the bank's own (usually less-than-brilliant) products.