Having and using a bank account is something that may seem relatively simple and straightforward. However, what you might not realize is that when you use a bank account, there are often tons of costs and fees that you’ll need to pay. To help you know more, we’ve put together the three most costly banking fees and what you can do to avoid them.
1. Overdrafts
An overdraft is a borrowing facility that is set up on many bank or building society accounts. The borrowing is linked directly to your account and you can use it to take out more money than you have in your account. Every overdraft facility will have an interest rate applied and some may also apply a fee that is to be paid whenever you’re overdrawn. The interest rate is usually quite high (often around the 15% mark) and the fees that are charged may be daily, weekly, or monthly.
While overdraft protection may be useful, the fees and charges can really mount up over time. That’s why it’s a much better idea to try and find alternative methods to cover the bills that you have — you should never see your overdraft as “your money” that is already in your bank account. You could also look into better banking for overdrafts — there are plenty of banks with no fees that can help you out.
2. Charges for declined direct debits and standing orders
Setting up a direct debit or standing order is an incredibly useful way to ensure that any bills or payments that you need to make on a regular basis are being paid. However, if you don’t have the right amount of money in your account when it comes to these direct debits to be paid out, then your bank can refuse to make the payment and actually charge you.
Not only is a refused payment going to cause you some issues with the company who you’re trying to pay, but having these charges on your account can also cause you problems too.
It’s important that you keep track of your direct debit payments — you should always know when they are coming out — and make sure that you’re aware of what’s already in your bank account too.
3. Cash machine fees
For the most part, taking cash out of your bank account is free of charge. However, there are some ATMs that will charge you a fee simply to withdraw your own cash. These are often convenience cash machines, just like those that you find inside small shops, rest stops, or nightclubs. Depending on the machine, you can often find that the charge to withdraw cash is as much as £5.
Even though you will be informed of the cost before you withdraw the money, this may not matter if you really need to have cash on you. A great way to avoid this problem is to make sure that you always carry a minimal amount of cash with you, especially if you’re going somewhere where it’s likely that they won’t accept cards.
These are just some of the fees that you may find your bank charging you for. Always be aware of the costs that are associated with your bank account and do what you can to ensure that you reduce the amount that you are charged — or else you may find yourself with a hole in your wallet!