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What The Banks Charge


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One reason why people sometimes go overdrawn is because of the cheque clearing system, which is currently under review. Payments made into your account can take several days to clear. If you write cheque before a payment has drawn you could go overdrawn – and the same applies to direct debits. Whenever this happens there will be a charge. The size of this charge varies from bank to bank, as the table of charges from major lenders shows.

Current account bank charges

Bank

Unauthorised overdraft charge

Bounced cheque / direct debit charge

Barclays

£30 per account per day (maximum charge of £90)
Additional £30 for further items that increase unauthorised borrowing by £1+

£35 (maximum per account per day)

Halifax

£28

£30 (no more than 3 charges per day)

HSBC

You do not pay more in fees than you are overdrawn by in each charging month i.e.: a £15 overdraft should cost £15 in fees.

£10 per item

Lloyds TSB

£30 a day (maximum of 3 charges in any one monthly charging period - maximum of £90)

£35 (maximum of 3 charges a day)

NatWest

£28

£38 per item

There are other charges that banks make for unauthorised borrowing. For example, in addition to the charges, most banks also levy a higher rate of interest on any unauthorised debit balances. This can range from around 8 per cent to as much as 30 per cent. This is why it’s worth paying attention to the terms and conditions that banks issue.

And it’s not just the initial charge that consumers have to worry about. The interest on an unauthorised overdraft may be higher than that on your authorised overdraft. What’s more, you could end up getting charged the higher rate of interest on the whole amount, not just the unauthorised balance.

And you could also be charged each time another transaction sends you further into the red – and there won’t be any grace period to allow you to repay either. With all these charges, the amount you pay for going even a penny overdrawn could be horrendous.

In the past, banks have levied similar charges for credit card holders who exceeded their credit balances. This used to cost credit card holders up to £35 a time and they had to pay interest on the charge as well.

However, that banking bonanza came to an end in April 2006 when the Office of Fair Trading (OFT) ruled that the charges were excessive and unfair, and capped them at £12 a time. This shaved billions off the banks bottom line and consumers are hoping that the OFT’s scheduled review of current account charges will have the same result. It all hinges on the question of fairness.

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