Though the banks may have come out on top in the recent unfair charges debacle, you can make sure you never get charged by your bank again by following these simple steps.
With all the charges that banks can arbitrarily apply to their customers, all of us at one time or another will have felt the sting of an unfair fee – whether that’s for straying 50p over your overdraft limit, or requesting a duplicate statement. But by being savvy you can beat the banks at their own game, and never get charged for your everyday banking again. We show you how.
Stick to your limits
If you don’t have an overdraft, this means making sure that you never let your balance drop below zero on your current account. Your balance must always be in credit, as most banks will charge you even if you slip a penny into the red. As such it’s really worth keeping a close eye your balance to make sure you never stray below zero.
It can be a good idea to speak to your bank and requesting that an overdraft buffer be set up just in case. This will mean that you go into an authorised overdraft rather than an unauthorised one, and while you may still be charged, the penalty is likely to be less. If you only anticipate going slightly below zero it’s a good idea to keep the overdraft small – perhaps £50-£100. This will get rid of the temptation to run headlong into your overdraft when you need a little extra credit.
For those who do have an agreed overdraft with their bank, make sure you know what your limit is and stick to it. If you aren’t sure of your official limit and whether or not it may have changed, it’s worth contacting your bank to check.
If you are ever worried that a payment will send you over your limit it’s best to request a temporary extension of your overdraft from your bank (they’re likely to grant it if it’s temporary) rather than go over your limit and hope they won’t notice (they will). Again, there may be a small fee but this is likely to be less than any unauthorised overdraft charges.
You should also check what your bank charges for overdraft usage. While some offer interest-free overdrafts (though usually only for a limited amount of time) others charge upwards of 19% APR, so it's worth switching to another account if yours is uncompetitive in this respect.
Be in the know
Following on from the last point, it’s really important to make sure you know exactly what your balance is at all times so that you don’t accidentally spend money you don’t have and end up with a hefty bank charge. This means checking your balance every day, which is easier to do if you have signed up for online banking.
It’s sometimes tempting not to look at statements and balances if you’re worried about how much you’ve spent in the month, but it’s really best not to bury your head in the sand and ignore how much money is left in your account. By knowing exactly where you are you can avoid going anywhere near zero or the edge of your overdraft, if you have one.
Some banks allow you to set up text message alerts to inform you when you are nearing your limit, which may be worth looking into.
Also, when you check your balance on an ATM machine make sure you look at your ‘available balance’ rather than just your ‘cleared balance’. A cleared balance represents the amount of money you have paid in that is available, excluding any cheques or debit card payments yet to go out. Whereas your available balance shows you the actual amount of money you'll have left in your account once any pending cheques or debit card payments have been approved by your bank.
Watch out for cheques and direct debits
If you send out a cheque from your current account keep a note of it and make sure you have enough available credit to cover the payment. Some cheques aren’t cashed for weeks after you’ve sent them, meaning you could forget about it and use your available balance, only to then be slapped with a bounced cheque charge.
The same goes for direct debits; if you have any set up on your current account make a note of how much will be going out and when, and ensure there is always enough in your account to cover the amount. If you do not have enough available balance the direct debit will be returned which means a charge from your bank.
If you do end up with a bounced cheque or unpaid direct debit charge for whatever reason, it is worth contacting your bank and asking them nicely to retract the charge – they may do this, particularly if you haven’t had a bounced cheque before and you assure them it won’t happen again.
Don’t pay for what you don’t need
It sounds obvious, but don’t accept a charge from your bank for something you needn’t pay for. For example, many banks impose a charge if you request a duplicate statement. If your bank does charge for this (check their website to make sure) consider simply accessing your statement online, having a mini-statement printed for free from an ATM, or switching to a bank who doesn’t charge for the service.
Likewise some banks will charge you for writing a banker’s draft, or sending a payment using CHAPS, or requesting special cheque clearance. In all such cases you should find an alternative rather than hand over money to your bank unnecessarily.
Stick to the rules
Some banks have very specific rules on how you must bank with them to avoid being charged, to keep up an interest rate, or to keep the account open. If your account is one of these, make sure you do stick to the rules as set out in the terms and conditions to make sure you never get charged. Or, if your rules are just too strict, consider switching to a more reasonable provider.
For example, you may be required to deposit a minimum amount into your account every month, and failure to do so can incur a maintenance charge of some sort. As such you should make sure you have the amount ready to deposit every month, perhaps by setting up a standing order from another account that always has available funds.
Draw up a budget
Finally, you can avoid bank charges for good by drawing up a budget and sticking to it. Include all your outgoings and regular income, and if your outgoings outstrip your income it’s time to rein in your spending. Pinpointing exactly where you are over-spending each month means you’ll never unexpectedly slip into your overdraft again and won’t incur any overdraft charges.
