Brits hit by £300 million in unarranged overdraft fees in the last year – but here’s how to avoid getting stung
On average people are are hit with a £33 fee each time they overspend - but this can sometimes be as high as £100
MILLIONS of Brits have been stung with unarranged overdraft fees in the last year - adding up to a combined £300 million, according to new research.
Customers are stung with fees when they spend beyond their arranged overdraft limit.
Banks have been slammed for not allowing customers to get rid of this costly credit facility by comparison website uSwitch.com.
On average people are are hit with a £33 fee each time they overspend - but this can sometimes be as high as £100, according to its research.
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Banks will often waive fees if it's the first time a customer has dipped into an unauthorised overdraft or if the account is topped up with cash within a certain amount of time, usually 24 hours.
But over half of people that uSwitch.com asked said they would rather have their card declined instead of getting hit with an authorised overdraft fee.
Tom Lyon, money expert at uSwitch.com, said: “Banks are raking in millions every year from unarranged overdrafts and failing to do everything they can to prevent customers from dipping deeper into the red.
“Consent and, ultimately, control over finances needs to be in the hands of consumers.
“Yet, too many are in the dark about whether they can turn off their unarranged overdraft facility and avoid these extortionate fees.”
HOW TO AVOID UNAUTHORISED OVERDRAFT CHARGES
WE asked the banks included in the uSwitch.com research if customers can opt out of them and what they can do to prevent getting charged a fee.
Co-op
Basic bank does not have unarranged overdraft facility. Current Account customers cannot opt out - but they can set up text alerts to tell them when the balance is low.
Barclays
Customers have to apply for emergency borrowing. If a transaction is less than £15 there’s a buffer which means they won’t be charged an unpaid transaction fee.
Over 10million customers have registered for text alerts to flag payments which incur extra costs.
RBS/NatWest
Customers can opt into an overdraft control service on the standard current account. Not all payments can be rejected but you don’t get charged fees or interest. You can opt in on the phone or in a branch.
Nationwide
Customers can set floor limit to £0 for unarranged overdrafts so that they will have payments rejected if they tried to make them without any cash in their account. They are still be charged a fee, so it’s not completely possible to opt out.
Customers can also sign up for text alerts to tell them when their balance is low. The FlexBasic account has no unarranged borrowing fees.
Santander
There are no fees for overpayments of £12 or less. Customers can set up text and email balance alerts.
Customers in financial difficulty can sign up to the Choice Current Account which doesn’t charge an unpaid transaction fee - capped at 20 day per month, with a maximum charge of £20 per month. It has a monthly £10 fee.
First Direct
You cannot opt out. Customers can set up text alerts to stop them going over their limit and being charged.
HSBC
Customers can opt out by signing up to an account that doesn’t allow an informal overdraft. Some accounts - including the Premier Account and Student Account - do not charge overdraft usage fees.
The bank also sends out text messages to customers to alert them when they’ve gone over their limit, giving them until the end of the day to return within their agreed limit.
“Overdraft costs vary widely between banks, so it also pays to compare all the options available to you and switch if you find a better deal.”
The comparison website thinks banks need to do more to help customers opt out of their unarranged overdrafts.
But banks say that they do already offer a range of ways for customers to avoid these charges, including setting up text alerts when their balance is low and opting out of unarranged overdrafts.
Others banks are unable completely stop unauthorised transactions due to the way that they are processed.
The cost of an unarranged overdraft
The policy and fees for unauthorised overdrafts vary depending on your bank and the account you’re signed up to.
If you’re unsure what the rules are for your bank then it’s up to you to check.
If you get charged a fee then you can try and challenge your bank on it and ask for a refund.
There’s no guarantee they will but if you’re a long-serving customer who doesn’t usually rack up charges then there’s a chance they will waive it.
If you’re worried about dipping into the red and getting charged a fine then you can also ask your bank about how it can help prevent this.
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