How to beat your bank charges
By
Staff Writer
Ruth Jackson Dec 01, 2009
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There can't be a UK resident alive who hasn't been ripped of by a bank at some point.
If you haven't been kicked with unauthorised overdraft charges, you'll have paid fees for using a cash point: you'll have been charged over the odds to use your card abroad; you'll have changed money at the "tourist rate"; you'll have earned no interest on your current account: you'll have paid a £300 "reservation fee" for a mortgage you end up not taking out; or, if you've been really unlucky, you'll have been cross-sold PPI with your mortgage.
You might even have been refused access to your own money when abroad. I once tried to withdraw £100 while in Australia, but was told I couldn't have it. The bank couldn't confirm that I was who I said I was. So I took my passport into an Australian bank and got them to call my bank confirming my identity. Still they wouldn't let me have my money. The bank said I could have £50 a day, and then had the nerve to say "Surely you can survive on that." How's that for contempt of customer?
We've been writing about these endless daylight robberies and customer service failures here for a long time. But while we hope we might have helped some of you to avoid being taken for too big a ride, we have seen few signs that the banks have any interest in behaving any better. That's why we were so pleased by the legal row over overdraft charges: for a short while it seemed that the big banks might actually be about to get some kind of comeuppance.
So far so bad. Last week the Supreme Court ruled that the issue of unauthorised overdraft charges couldn't be investigated by the Office of Fair Trading (OFT). There is a view that this is a perfectly reasonable decision: after all, if you can't manage your finances and borrow money from the bank without asking permission, why shouldn't you be penalised? We don't agree with this view. There are penalties and there are penalties. A few pounds might be reasonable – after all money isn't completely free to anyone - but the hundreds and hundreds of pounds that many (mostly lowish income) people have run up in fees just aren't.
So what next? The bad news is that the chances of successfully reclaiming old charges relating to unauthorised overdrafts are now very slim. The banks clearly aren't going to have to reimburse you, so they won't. The good news is that the massive popular campaign against unauthorised overdraft charges has shown that millions of us aren't prepared to accept the banks' unfriendly behaviour any more. And while we may have lost in the courts, we can fight back on the high street. How? By avoiding fees where ever possible, and by abandoning the worst banks.
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Avoiding new charges
First, take the time to read your bank's policy on fees and interest rates. If you think you are being treated unfairly, tell them. Note that they are required by law to warn you before they charge you any fees. So take the letter of warning down to your branch and ask them to explain why you are being charged. Then get the manager out and argue your case. You might not always be successful, but it's worth a try. I've got out of some this way.
Dump your bank
Then take a look at your last few statements and what your bank has charged you. If you are paying charges you aren't happy about, or an overdraft interest rate that you think is too high, get a new bank account. The only way the banks are going to change their charging methods is if they start losing customers.
If you use your overdraft but rarely slip beyond it into an unauthorised overdraft, then switch to Alliance & Leicester. Their Premier Current Account includes an interest-free overdraft for the first 12 months, after which you'll be charged 50p a day, capped at £5 a month. But if you go beyond your limit, you'll pay £5 a day,capped at £100. So if you only ever slip beyond your overdraft for a couple of days at the end of the month, that's much better then the £25-£35 penalty charges other banks will hit you with. Best of all, if you switch to this account before 13 December, Alliance & Leicester will give you £100.
Go back to basics
If you regularly spend beyond your overdraft limit, then it is time to take control of your finances. You are your bank's dream customer, constantly coughing up penalty fees. Stop letting it happen by switching to a basic bank account. These accounts don't offer an overdraft facility, so once you've spent the money you have, that's it. You won't go into overdraft because you can't. Most of these accounts don't pay you interest when you are in credit, but for those more used to paying penalty fees than earning interest that's probably not going to be a deal breaker. Of all the basic accounts on offer, Coventry Building Society's CallSave MoneyManager pays the most interest. But at 0.15% it is only just better than nothing. Better might be Halifax's Easycash which comes with a Visa Electron card. That could come in handy when paying for things such as flights online, as it is one of the few cards you don't tend to get charged a fee to use.
If you have an existing overdraft, you can still get a basic account – by shifting the overdraft on to a credit card first. This might sound nuts, but it does make some sense. The Virgin credit card allows you to move money into your bank account to clear your overdraft and then offers 0% interest on balance transfers for 16 months. The key, as ever, is to make sure that you then find a way to pay the debt on the card off. If you don't, you'll just be helping the industry to rip you off in yet another way.
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