We recently told you about a Which? investigation that has ‘shattered the myth’ of free banking.
According to the report, UK current account holders are being charged as much as £900 a year for going into their overdrafts without permission. They are also facing multiple, often unfair bank charges linked to these supposedly ‘free’ accounts.
Are we entitled to free banking?
The research has triggered an interesting debate around whether UK consumers should actually expect their banking to be free.
Some people argue that banks are businesses, not charities, and as such should not be expected to let people run into their overdrafts for nothing.
Others, however, are angry at many banks’ lack of transparency about the fees they do charge, and maintain these banks shouldn’t advertise current account services as ‘free’ when in fact charges can apply.
How to bring your banking costs down
One thing we all agree on is the need to minimise our current account charges wherever possible.
So, here are six ways to help you dodge unfair bank charges and play the banks at their own game.
1. Authorised overdrafts can be expensive
By now, most people know that running into an unauthorised overdraft can prove horribly expensive.
However, many authorised overdrafts also come with high interest charges: For example, RBS/Natwest and HSBC both currently charge APRs of almost 20% for authorised overdrafts.
To avoid charges like these, look for a current account that offers 0% interest on overdrafts. Just be aware that even in these cases, financial and time limits will apply.
Alternatively, put essential spending on a credit card that offers 0% interest on new purchases. Then make sure you clear the balance before that 0% period ends!
Read Overdraft charges: 5 things you need to know to find out more.
2. Dodge overseas charges
Take care when using your debit card to withdraw cash from your current account at foreign ATMs. Many banks charge for this service, and the fees can really mount up.
Instead, consider taking out a prepaid card and loading it with currency before you travel. The best prepaid cards should levy lower fees than you may otherwise face.
In addition, prepaid cards allow you to more closely monitor how much holiday money you’re spending. And most providers will cancel and replace your prepaid card if it’s lost or stolen.
3. Make your current account pay you!
Switching to the right bank account could actually make you money. Certain current accounts - including those from Halifax and Santander - pay customers an in-credit rate of interest on their cash.
Of course, if you constantly have large amounts of money in your current account, it may make more sense to put it in a decent savings account instead. Read How to find the best savings rates to find out more.
4. Keep a close eye on your bank balance
It’s important you check your bank balance as often as possible (at least every few days) to avoid penalty fees, unfair bank charges and other nasty surprises.
This is the case even if you’re in the black and nowhere near your overdraft limit. That way, you’ll be able to spot any fraud or unauthorised transactions on your account straight away, and nip problems in the bud.
5. Avoid phone banking and go online
We all know what it’s like to be stuck in a long phone banking queue, with both the phone bill and the blood pressure quickly rising. This is particularly true if you’re forced to call from your mobile, when call costs per minute can be extortionate.
So, set up online banking and avoid calling if at all possible. This should save you time as well as money, and help you get a clear overview of your full financial situation whenever you log in.
6. Read the small print!
You know those letters you get from your bank from time to time? The ones that end up unread at the bottom of a pile of paperwork? Dig them out and read them from beginning to end.
Often, your bank will put information about upcoming charges very near the end of these letters - so it’s pretty easy to miss. For example, they may indicate that unless they hear from you, they will assume certain things about your financial preferences and charge ‘arrangement fees’ accordingly.
If, on the other hand, you pick up on these upcoming charges straight away, you’ll be in a much better position to challenge them or make your bank aware of any changes in circumstances.