Four fiendish rip-offs to watch out for!

We all know banks need to make money, but must it be so blatantly at our expense?

If you're feeling a bit out of pocket at the moment, spare a thought for the poor banks. They're struggling to recoup some of the millions they've lost over the past year or so due to risk-taking and bad management. And where are they hoping to skim this money from? Well, from us, of course!

The worrying thing is, some are doing it so subtly that many of us won't even know it's going on. So if, like me you'd like to keep your hard-earned cash out of your banks sticky hands, check out these tips.

The rise of the fixed rate mortgage rate

We all know that the Bank of England has kept the base rate steady for the past few months. So why then are fixed rate mortgages getting more expensive?

Halifax, Cheltenham & Gloucester and Nationwide BS are the latest lenders to raise their fixed rate deals, in one case by a whopping 0.85%. And while just three months ago we were looking at fixed rates of just 3.95%, brokers have warned that the average 5-year fix could hit 6% within a few weeks.

Swap rates have risen

Unlike tracker mortgages which follow the base rate, fixed rates are linked to swap rates (the rates that financial institutions use to borrow from each other). It is these swap rates that have risen significantly over the past few months. Lenders are starting charge each other a bit more for credit, which means they'll start to charge us that bit more for our borrowing too. So fixed rate mortgage rates rise. Fair enough.

Lenders siphon off more profit

But this is not the whole story. Recent research has revealed that the average 5-year fixed rate deal a year ago was 0.87% above the cost of funding. So, on every mortgage, lenders made just less than one percentage point of profit.

Last month, however, the average 5-year fixed rate was nearly two percentage points above the cost of funding - meaning lenders are swiping that extra one percentage point and using it to boost their flagging profits. Great.

One thing is for sure, good fixed rate deals are being pulled at a rate of knots. Don't hang about if you need one - find out how to fix your mortgage before it's too late.

Banks cut savings rates

If you thought borrowing was expensive, you'd better not look too hard at what your savings are doing. As well as raising borrowing rates, banks are reducing our savings rates, too.

Marks & Spencer, for example, has just become the latest lender to cut the rate on its Advantage ISA from 3.1%AER to 2.5%AER. Check the rate your savings are earning and find out how to get a better return on your money!

Credit card companies raise their rates

And our old friends the credit card companies are seemingly happy to stick a knife in when times are tough.

According to independent researcher Moneyfacts, the average interest rate charged on credit card purchases in June 2007 was 16.3%APR. Fast forward two years and the average rate we're currently being charged is 18.1%APR - nearly two percentage points more. 

And where's that extra money going? Well it's boosting the profits of credit card providers, of course, while simultaneously making life more difficult for the growing number of people struggling with debt.

What's more, this isn't the only trick up the sleeves of those nasty plastic providers. Many providers have increased their cash withdrawal fees, foreign usage charges, and reduced their monthly minimum payment - which, by making it take longer to pay off, ties you to them for even longer.

Of course, it could all end up costing more money than they make - the more they hike up their charges, the more likely it is their customers will end up defaulting on their debts.

My advice? If you're good with money and always pay off that balance in full, switch to a 0% credit card for new purchases or a cashback card.

If you're currently in debt and have a balance to clear, move it to a 0% card for balance transfers. Then cut up your credit card. Otherwise you'll fall foul of negative payment hierarchy - another sneaky trick.

Raising the cost of going in the red

And finally, if you're the sort that regularly dips into their overdraft, beware. Authorised overdraft rates have been sneaking up over recent months despite the fact the base rate has remained unchanged.

Nationwide, for example, has increased the rate of its authorised overdraft to 18.9%APR (from 12.9% last year). And Barclays' authorised overdraft is now a whopping 19.3%APR, up from 17.9%. And the reasons for the hikes? Because increasing numbers of us are unable to pay back our existing overdrafts.

Personally I think these sneaky increases are pretty shocking. But there are ways we can fight back. There are still current accounts available that offer free overdraft facilities - and some even pay you to switch.

First Direct for example currently pays new customers £100 to move to them - and offers a free £250 overdraft. You'll need to pay in your salary (at least £1,500 per month) to avoid the £10 monthly fee, but it could save you a fortune in the long run.

And Alliance & Leicester's Premier Direct account offers a 0% authorised overdraft for a year (after this you will be subject to a 50p day usage fee).

But what if you don't fancy switching current account? In this case, I would firstly ensure that you have an authorised overdraft set up (unauthorised debts tend to cost a lot more) and aim to clear that overdraft as soon as possible. Here are some tips on how to wipe out your overdraft forever.

So there you have it, just four of the ways our banks and lenders are boosting their profits at our expense. And I think it's high time we started to start fighting back!

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