Running your bank or building society account doesn’t have to cost much – in fact, if you don’t go overdrawn and use your cards carefully, you might pay nothing at all. But you can rack up high charges very quickly if you withdraw money you haven’t got in your account or go over your authorised overdraft limit.
According to the FCA, you are 24% less likely to incur unarranged overdraft charges if you use a mobile banking app and text alert service.
An overdraft is a way of borrowing money from your bank or building society, linked to your current account.
It’s possible to take out more money than you have in your account, but your bank or building society will probably charge you fees and/or interest.
If you go overdrawn you’ll usually have to pay:
- a high interest rate of up to 15-20% equivalent annual rate (EAR) or more
- a daily, weekly or monthly fee for the time you stay overdrawn.
Overdraft fees can mount up quickly.
Always agree an overdraft in advance with your bank or building society; otherwise it will cost you much more.
If you’re getting close to your limit, talk to your bank right away.
Transaction fees if your overdraft is unauthorised
If you go over your authorised overdraft limit you might be charged for every cash withdrawal or cheque or card payment you make, even if the bank doesn’t allow the payment to go through.
These fees can be £10-£25 for each transaction.
You might also be charged for refused Direct Debits and standing orders – see below.
Charges for refused Direct Debits and standing orders
Do you often have to pay charges on your overdraft? You might be better off with a fee-free basic bank account or an account with a lower overdraft fee. If you want more information we’ve pulled together a collection of guides, tips and handy links.
If a Direct Debit or standing order is due to be paid and there’s not enough money in your account to cover it, the bank can refuse to make the payment and charge you.
This can be as much as £25 each time a payment is refused.
Most current accounts charge for refused payments. ‘Jam jar’ accounts don’t charge penalties in this way, but normally charge a monthly fee instead.
To make sure you don’t get taken by surprise by Direct Debit payments, keep an eye on your account and make a note of when payments are going out, making sure there’s enough money in your account the day before. You could also try using an app like the one below that helps you avoid rejected payments and penalties.
If you want to find out more information, follow the links below:
Monthly Maximum Charges
Current accounts now have a Monthly Maximum Charge (MMC) in place, which is the maximum amount you’d pay each month in fees, charges and interest on unarranged overdrafts. It doesn’t affect authorised overdrafts, and the amount varies depending on the bank or building society, and which current account you have.
Make sure you check what the MMC is with your current account so you know how much your overdraft is costing you.
Cash machine (ATM) fees
In the UK, taking money out of a cash machine with your debit card is usually free.
However there are some exceptions:
- Some convenience cash machines – especially ones inside small shops, on garage forecourts and in nightclubs – can charge up to £5 each time you withdraw money from them. They’ll tell you about the charges on screen before you take out the cash so that you can decide if you want to go ahead or not.
- Using a credit card to take out cash comes with a charge, and you pay interest from the date you withdraw the money – interest-free periods only apply to card purchases.
- Some prepaid cards charge you a fee to withdraw money from cashpoint machines.
Foreign transaction fees
Banks charge fees of up to 3% for some foreign transactions, such as using your debit card to:
- withdraw cash from cash machines
- make purchases while you’re abroad
- some might also add a currency conversion charge but this depends on your card – some are much more travel-friendly.
Same-day bank transfer fees
Most same-day bank transfers are free using the Faster Payment Service (FPS).
With most banks, you have to use CHAPS and pay a fee if you want to transfer very large amounts into an account the same day.
A CHAPS transfer can cost you £25 to £30.
Fees for one-off items
Each bank has a list of fees it charges for one-off items, such as:
- stopping a cheque
- getting a banker’s draft
- ordering duplicate statements
- getting copies of paid cheques
- requesting a reference from the bank
- special presentation of a cheque (finding out quickly if the cheque will be paid).
These are usually between £3 and £30 – it varies from bank to bank.
Your bank will tell you if there is a charge, and how much, when you ask for any of these items.
Will your bank’s fees ever change?
The fees can change, but your bank must give you notice.
Your bank or building society will tell you about their fees when you open your account.
If there’s any change to the fees or terms and conditions of running your current or payment account, they have to tell you well in advance – usually two months.
This notice period does not apply to all saving accounts or overdraft changes.
What to do if there’s a problem
If you have a problem with fees and charges, talk to your bank:
- if you think the bank has got it wrong, give them a chance to put it right before you complain
- if you think that the bank has charged you correctly but you don’t think you should pay, it’s still worth asking them to waive the charge
If you are not satisfied with their response, you can make a formal complaint:
- make a note of everyone you speak to and what they say, as well as the dates and times of all your calls
- put your complaint in writing, mark your letter as a ‘complaint’ and make it clear what you are complaining about and what you would like done
- state your account number and sort code and provide any letters, papers or statements that explain the problem.
If you’re still not satisfied, you can complain to the Financial Ombudsman Service.
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