/ Money

Unauthorised bank charges – too expensive and complicated

Arms holding up 'help' sign

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?


I have read so much about bank charges that I play safe by keeping more than necessary in my current account. My expenditure varies from month to month because of when direct debits are paid and because my credit card bills are paid off by direct debit to avoid ridiculous interest charges. It means that I don’t have to worry about the greedy banks.

I feel sorry for those who cannot afford to keep a decent balance in their account. I have no sympathy for those who are obsessed with spending and give no thought to saving for emergencies and other unforeseen expenses, but that is off-topic.

The inconclusive Supreme Court findings in OFT v Abbey National plc and
others of 2010 leaves the banks in a position pretty much to continue to
charge whatever fees they like in respect UNauthorised overdrafts incurred
…. with the advent of Faster Payments instead of taking up
to four working days previously, it should be possible to transfer funds into
current accounts taking effect immediately, if user were prudent and
cautious enough to avoid going into the red in the first place, providing
he’s in full control of finances and as to its ultimate destination that
unfortunately is not the case for many people or the less careful
current account user.

Wavechange, spot on in what you say as to second sentence of
your last paragraph.

A slight correction, landmark case heard in 2009 not 2010:

Office of Fair Trading v Abbey National plc and Others

Masurubu says:
19 January 2012

My son went £1 over the £60 debit limit the then Abbey National put on his account. They wrote him a letter which did not really make it clear that he was going to be fined £10 for every withdrawal he made that breached the £60. He used his credit card to buy cigarettes, and so a (then) £1.80 packet was costing £11.80. That went on until he received his account, which then showed a debt of over £1,000, morfe than 90 percent of it being from the £10 fines. There was no way a 17 year old trainee solicitor’s clerk could find that sort of money so I had to pay it myself. I considered then that the bak’s actions were close to theft, and I still do.

Smithy says:
24 May 2012

How did a 17 year old get a credit feature? Surely you need to be 18 to enter into a credit agreement.

Dear Which? I have been long convinced that the banks (all of them, it seems, so it is not worth changing) no longer view us as customers, despite many of their advertising attempts, but as punters to be stung for as much as they can get out of us. Good luck with your campaign, which I have just joined. Dr R.Carmichael

Jeffrey Dobson says:
4 April 2012

Bank charges hit the poorest in society unfairly hard and can drive them into the hands of money lenders. A relative of mine was badly affected by this with HSBC. First, he couldn’t get an overdraft facility because he didn’t earn enough. He was on minimum wage so rarely had much left in his account at the end of the month. So inevitably when a debit came in before his pay he got a £12 bank charge for overdrawing; then a charge for bouncing a direct debit; this left him less money for the next month; hence another £12 charge. And so it went on until 18 months later and over £3000 in charges, and after borrowing money at 44% APR to try to clear things, he was nearly suicidal. Needless to say he didn’t have much financial sense then, but that isn’t a reason for banks to take advantage of poorer and less savvy members of society. They appear to be quite happy to just sit back and make charge after charge.

This is because banks are beginning to get to the payday loan industry, and they are playing dirty. Financial institutions want to make some extra cash, and they realized they could do so with payday loans; they do not tell you that they are typically charging more than the average cash advance costs now. A lot of banks are getting trouble for this.

Jeffrey Dobson says:
22 April 2012

The problem with bank charges is not just the amount but the way they escalate. A charge for being overdrawn makes you more overdrawn so you get charged the next month as well, and the next….until you are in serious trouble. Direct debits get bounced, so more charges. And to add insult to injury some banks charge so much for a small agreed overdraft that the overdraft is eaten up paying the fee for setting it up!