Instant cash loses its attractions as fees loom behind holes in the wall

CHARGES are starting to affect the convenience of using cash machines, which were heralded in the 1980s as a great leap forward in customer service.

Nationwide Building Society is launching a postal savings account, InvestDirect, tomorrow. It offers high rates of interest and cash withdrawals via automatic teller machines. But customers will have to pay to use the cash machines.

A withdrawal from one of Nationwide's 730 machines will cost 50p; taking money from networked machines operated by other banks and building societies will cost pounds 1.

Nationwide is one of 32 organisations that belong to the Link network of nearly 6,000 cash machines.

There is also bad news for Abbey National customers who use the Link system. From 7 June, Abbey is to start charging its savers if they withdraw money from cash machines operated by other banks and societies in the Link system.

The charge will be 60p per cash withdrawal, but it will not apply to the bank's current account or its high-interest current account.

Abbey says that less than 4 per cent of its 11 million savers withdraw money from 'foreign' cash machines, but the number is increasing. Abbey, in common with other Link members, pays 43p for each such withdrawal. However, Abbey National has nearly a thousand of its own cash machines so, while its customers have relatively little need to use non-Abbey machines, many customers of smaller banks, with smaller cash machine networks, probably make frequent use of Abbey's machines. Each time they do this, Abbey receives 43p.

'This is not a customer- friendly act, but for the Abbey it is a revenue decision. It is a win-win situation for the bank,' said one of its competitors.

Abbey denies that it is making a profit on the system, saying that there are other costs involved in belonging to Link apart from the 43p charge for non-Abbey withdrawals.

The charges will irritate Abbey customers who live in places where there are no Abbey machines. A spokesman for the bank said it was constantly reviewing the coverage of its cash machine network and that new stand-alone machines were being introduced in areas where there were no branches.

Halifax Building Society, also a Link member, already charges 60p for non-Halifax machine withdrawals from Maxim current accounts and Cardcash deposit accounts.

Nationwide's InvestDirect account will be the first postal account to offer savers access to their cash through machines. But Nationwide says the cash withdrawal service should be seen as an added service, for emergency withdrawals, for example. The new account is not designed as a conventional instant access account.

The society must keep costs down if it is to pay higher rates of interest.

The minimum investment is pounds 2,000 and there are five interest rate tiers, ranging from 5 per cent gross (3.75 per cent net) on pounds 2,000-pounds 9,999, to 6.7 per cent gross (5.03 per cent net) on pounds 100,000 and over.

Some other members of the Link network are watching the Abbey and Nationwide moves with interest.

Paul Duffin, head of savings at Leeds Permanent, said his society had no plans to charge customers for withdrawals from non-Leeds machines. It was difficult for smaller building societies to introduce charges, because large numbers of their customers needed to use other institutions' machines.

But Mr Duffin predicted that there would in future be more 'selective charging' along the lines of the Nationwide move.

'You can charge customers on certain products or on certain numbers of withdrawals from accounts,' he explained.

Nationwide will take applications for its InvestDirect account through branches or on the free telephone line, 0800 665511.

(Photograph omitted)