BALANCING YOUR BOOKS

If you go overdrawn without asking your bank, which ones will charge you a fee?

It’s tempting to use your overdraft sometimes but if you don’t arrange it with your bank first, it could work out quite expensive. The financial watchdog, the FCA, said last year it was considering a ban on unarranged overdraft charges and some banks have already ditched them altogether, but others charge up to a whopping £95 a month. These fees are a big earner for the banks (an estimated £1.2 billion revenue a year). That’s money they’d have to generate elsewhere if charges were scrapped – most likely from even lower interest rates on savings and higher interest on credit cards.

Unarranged overdrafts

The good news is Lloyds, Halifax and Bank of Scotland have scrapped fees for going into the red without asking. But Barclays has stopped unauthorised overdrafts and will charge you if you try to make a payment without cash in your account.

Charges for unarranged overdrafts

For banks that do charge, you’re generally able to go into the red by £6-£10 for free although it does vary from bank to bank. Several banks charge £6 a day but set a different monthly maximum charge. For Santander’s popular 123 account it’s £95, whereas NatWest and RBS cap it at £90. HSBC has a cap of £80 (and has a range of charges, rather than a set daily fee) while Nationwide caps fees at £50 a month. These fees won’t necessarily apply to all current accounts offered by the banks mentioned.

Can I reclaim fees?

It’s hard to reclaim bank overdraft fees but not impossible. If you are in financial hardship (struggling to pay for the basics, or the charges are taking a big chunk of your income) you have more chance of succeeding. Complain to your bank and take your case free of charge to the Financial Ombudsman Service if you don’t get a resolution.

Fees are a big earner for banks; that’s money they’d have to generate elsewhere