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 take out money you haven’t got in your account or go over your overdraft limit.
Overdraft interest and charges
It’s possible to take out more money than you have in your account, and this is known as an overdraft. There’s usually a cost for using your overdraft in the form of interest.
Overdraft costs can mount up quickly, so think carefully before using them.
Banks and building societies are charging between 15% and 40% APR (annual percentage rate).
You should compare the overdraft interest of your bank against others in the market to make sure you’re getting the best deal. You can use our Bank Account Comparison Tool to do this.
Some banks are offering the lowest interest rates to customers with the best credit scores. You can find out more about improving your credit score on our website.
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. This is true even if the bank doesn’t allow the payment to go through. However, if the bank does charge a fee for rejecting a payment, its fee must be in proportion to its costs.
Charges for refused Direct Debits and standing orders
If there’s not enough money in your account to cover a Direct Debit or standing order, the bank can refuse to make the payment and charge you.
Most current accounts charge for refused payments. ‘Jam jar’ accounts, which help you organise your money into different pots, don’t charge penalties in this way, but normally charge a monthly fee instead. Read our guide on Jam Jar accounts for more information.
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. Then make 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 – typically around £3 - and you pay interest from the date you take out the money. Interest-free periods only apply to card purchases.
- Some prepaid cards charge you a fee to take out money from cashpoint machines.
Foreign transaction fees
Banks charge fees of up to 3% for most foreign transactions, such as using your debit card to:
- take out cash from cash machines
- buy things while you’re abroad
These fees are usually called ‘load fees’ or ‘non-sterling transaction fees’.
Some banks might also add an extra fee – which may be called a ‘non-sterling purchase fee’. These are often flat fees of between £1 and £3, which are applied to every transaction. Some banks only apply these extra fees if you’re taking cash out from a cash machine. So you can reduce these fees by limiting the number of times you use a cash machine abroad.
Charges for using cards abroad vary, so it’s worth checking your bank’s charges before you leave the UK.
Same-day bank transfer fees
Most same-day bank transfers are free using the Faster Payment Service (FPS). But all banks cap the amount you can transfer each day using the Faster Payments system. The lowest limits are around £10,000. If you’re making a large transfer – as part of a house purchase, for example – you may need to move larger amounts at short notice.
Some banks are able to temporarily raise their Faster Payments limit to facilitate larger transactions free of charge. But others will use the CHAPS payment system, and will charge you a fee of between £15 and £55 for the transfer.
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. But it’s worth checking what these fees are before you open an account.
Banks have to publish a full list of their fees – and you should be able to find it on their website.
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 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. Also make a note of 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. Also 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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