Don't get stung by bank charges

One bank has just sliced its bank charges in half, but others still charge £28 just for going overdrawn. Find out how much your bank charges you.

There are few things in life more irritating than being charged for going overdrawn on your current account. It's bad enough if my money doesn't last me the month as I thought it would, but to then be whacked with a charge - often more than £20 - on top has always struck me as a tad excessive.

And I'm not the only one - overdraft charges have long been the dominant subject of consumer complaints to the FSA and the Office of Fair Trading.

Indeed, last week the FSA published figures for the first time on just how many of us have complained about such charges - more than 200,000 in the first half of this year alone.

Jump before you're pushed

And those complaints have led to a big legal battle, with the major banks and building societies protesting against the Office of Fair Trading being allowed to regulate these charges. A battle that, in all honesty, feels like it's being going on forever and a day.

Now, Royal Bank of Scotland - a bank me and you own a majority stake in, lest we forget - has this week opted to cut its overdraft charges, something that undoubtedly it should be praised for.

Whereas before it would charge you £30 if you spent while overdrawn, from 1 October, that falls to £15. The fee for going overdrawn without consent is also cut from £28 to £20, while further cuts have been made to the fees you would be whacked with for cheques or direct debits bouncing.

And the move has received raised eyebrows all round, as Royal Bank of Scotland was one of those major banking institutions which until now has been fighting tooth and nail to stop the Office of Fair Trading from regulating its overdraft charges.

The Hall of Shame

Breaking rank in such a way is a surprise, and welcome move, but where does Royal Bank of Scotland now stand compared to the other major banks and building societies in terms of charges?

Bank/Building Society	Charge for going overdrawn	Charge for spending while overdrawn	Charge for cheques/direct debits bouncing
Barclays	£0	£8	£8
HSBC	£0 (so long as you have not previously gone overdrawn in the last six months)	£0	£0-25
Lloyds	£6 per day if overdrawn by less than £25, £15 per day if overdrawn by £26-£100, £20 per day if overdrawn by more than £100. Monthly fee of £15 also occurs if you go into an unplanned overdraft	£0	£20
Royal Bank of Scotland / NatWest	£20 per month	£15	£5
Nationwide	£20 per month	£21.50	£30
Abbey	£25 per month	£5 for transactions up to £9.99, £15 for transactions up to £19.99, £25 for transactions up to £29.99 and £35 for transactions over £30	£5 for items up to £9.99, £10 for items up to £19.99, £25 on items up to £29.99 and £30 on items costing £30 or more
Halifax	£28 a month	£20 on student accounts, £35 for all other customers	£20 on student accounts, £35 for all other customers

To be honest, looking at that table makes my skin crawl.

The excuse these financial firms have long used is that the charge is really a fee for the service they provide, which is complete and utter tosh. And thankfully it seems that the penny is dropping that such charges are completely out of line.

The domino effect?

Firstly, it's important to note that the changes that the Royal Bank of Scotland has made will make absolutely no difference to the ongoing investigation by the Office of Fair Trading.

Secondly, I reckon we'll see similar cuts in charges from other banks and building societies in the coming months. The writing is on the wall for them, so the quicker they bite the bullet and do the right thing, the better for all of us.

Of course, they will have to find up to £1bn to refund customers who have been hit by these appalling, rip-off charges over the years. Plus, they will have to cope with annual revenues falling by £2.6bn a year. And while I won't be losing too much sleep over that development, I am nonetheless concerned that they will soon make up for it by charging us all more for the pleasure of having a current account with them.

But if that is the price to pay for no longer being forced to pay through the nose for having the temerity to go slightly overdrawn, then so be it. Hopefully this long and bloody battle is finally nearing a close.

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