Unauthorised bank charges – too expensive and complicated
Do you know how much your bank charges if you go overdrawn without authorisation? Many (including myself) don’t – but our research reveals how confusing the charges and fees are. Isn’t it time things improved?
I have four current accounts, each with different banks and building societies, and I can honestly say that I never, for one minute, paid any attention to the unauthorised charges when choosing those accounts.
Looking back, I think I operated on the assumption that they’d all charge much of a muchness. How wrong I was.
Charges are too confusing
Our new research shows that the charges vary massively from bank to bank. Confusingly, one bank may be cheaper for small overdrafts but very expensive for larger ones and vice versa.
Not only that – the banks all charge in a variety of different ways. There are buffers, daily fees, unpaid and paid item fees, caps, interest charges and arrangements fees. And that’s just a few of the fees you may come across.
So, could I work out how much I might be charged by my four banks? The research suggests that I would seriously struggle to make head or tail of the charges.
We gave Which? members a mock bank statement and asked them to see if they could calculate the charges they would pay at four different banks. Out of 48 calculations, the volunteers got just seven right between them. Not one of the volunteers got all the calculations right, proving just how hard it really is to compare charges.
The problem is that despite changes banks have made to their unauthorised overdraft charges in the last few years, we still think they’re too high and disproportionate to the banks’ costs. And if none of us can work out whether one bank is more expensive than another, what incentive is there for banks to drop their charges from where they are now?
Make it easier to compare
Of course, few people take out a bank account planning to use an unauthorised overdraft. But a simple change in circumstances can make all the difference to whether we have more leaving our account each month than going in. It’s then only a matter of taking your eye off the ball for a couple of days to find you’ve been charged.
Which? is calling on banks to make data files available to customers, showing exactly how they use their accounts. Used in conjunction with a specially designed comparison site, this would help customers to compare charges and, we hope, vote with their feet.
We also think the regulator needs the power to assess bank charges for fairness and we’re lobbying for this to happen with our Watchdog not Lapdog campaign.
What do you think about unauthorised bank charges? Do you have any idea about the cost of using an unauthorised overdraft with your bank? Have you ever tried to work it out?
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