It’s estimated that bank account holders pay an average of £742 in charges and fees throughout their banking lifetime. Obviously this is an average and not every one will pay this much but the majority of people do get charged for something at some point in time. Although these charges are now being disputed and there is a court case in progress to try and abolish unreasonable bank charges they are still currently being charged and so you’ll want to try and avoid them if possible.

The two main bank charges that people fall victim to are over draft charges and declined request charges.

Unauthorised and authorised over draft charges

The vast majority of banking customer have the use of an over draft facility. These over drafts generally have an agreed limit which is free to use however exceeding the limit then incurs a pretty hefty charge. So for example, you may have a £100 interest free limit but an over draft limit of £1000. Thus staying within the £100 limit saves you from being charged however not many people with a £1000 over draft manage to stay within the first hundred pounds! After the agreed limit you’ll be charged a set level of interest and this differs from bank to bank.

Should you then exceed your over draft limit you’ll be subject to unauthorised over draft charges and these can be really quite expensive. Most banks set their charges at around 15% however you can sometimes find accounts with rates as low as 8%. Obviously the way to avoid these charges is to stay within your agreed limit and if you think you’re going to exceed the limit then talk to your bank before you do so – some banks will temporarily extend your limit to help you out.

Declined Request Charges

These charges are made whenever a cheque, direct debit or standing order is declined because you don’t have the money in your account to cover it. The banks put the charges down to administration costs and so are often non-negotiable. Each lender will have their own charges however they generally fall between £20 and £40 for each payment that’s refused. Thus if you have a number of payments refused in the same month you could end up with a pretty hefty bill. Again, the best way to avoid these charges is to make sure you always have enough in your account to pay any direct debits and standing orders that are charged to the account. Plus, if you’re running short of funds then refrain from writing cheques as a bounced cheque is subject to exactly the same charges.

Good money management is the best way to avoid bank charges and keeping a close eye on the money going in and that going out is a must. If you think you’re going to have trouble paying your outgoings then it is worth talking to the bank as you never know when they may be willing to help.