What Is Your Bank Charging You? A Guide To Bank Charges
When you're shopping around for a bank account there are a lot of factors to consider. Many people go for up-front incentives, such as money paid into the bank account, vouchers or a gift. However, it is worth looking at bank accounts in more depth to find out what you might be paying for various transactions. Here are some of the transactions that banks might charge you for.
Authorised Overdraft
An overdraft is like a short term loan. The bank gives you permission to spend more than the funds you have in your account. This amount is usually fixed in consultation with the bank and may be reviewed at stated periods. Some banks have a free authorised overdraft up to a certain limit and charge for any balance over that limit. This is the best way to arrange an overdraft.
Unauthorised Overdraft
When customers spend more than they have in their accounts without arranging an overdraft limit, this is known as an unauthorised overdraft. Banks penalise customers heavily for this by charging an unauthorised overdraft fee of more than ?35 in some cases. The excess spending will also be charged interest at a higher rate than normal.
Cheque Services
Some banks charge for clearing cheques more quickly than the standard period (this can range from three to seven days depending on the banks involved and the day of the week). There may also be fees for processing cheques in a foreign currency.
Taking Money Out
Sometimes customers need to set up direct debits, where companies take certain sums from a bank account each month. They may also wish to set up standing orders, where they arrange to pay a certain amount to another bank account or company each month. Some banks charge a setup fee for these services. . It is also worth looking at the daily withdrawal limit on a current account. This can vary widely depending on the bank you choose.
Other Bank Charges
Banks may also charge for other services such as:
1. setting up a loan facility 2. changing or issuing foreign currency 3. writing cheques that exceed the cleared balance in an account 4. stopping a lost cheque
Banks will also charge customers if they have to write to them about an infraction of bank rules, such as exceeding the overdraft limit or defaulting on loan repayments. This means that defaulting customers have to repay the debt as well as the additional charges.
Doing some research could save consumers a small fortune in bank charges. In addition for looking for incentives, consumers should look for banks that keep their charges as low as possible. With a bit of digging, it is easy to find banks with:
5. an automatic overdraft limit for which there is no charge 6. free standing orders and direct debits 7. free transfers between banks 8. low unauthorised overdraft fees 9. low charges for other bank transactions
Choosing a bank that fits this profile will help with overall financial health.
Joe Kenny writes for the UK personal finance sites http://www.ukpersonalloanstore.co.uk and also http://www.cardguide.co.uk
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