Ideally, you won’t have to pay fees to your bank or building society. But it’s best to know exactly what charges may apply, so you can avoid these when possible.
Here, we explain the most common types of bank fees, and how they work.
Overdraft fees
If your bank account comes with an overdraft, there might be a certain amount you can use interest-free, known as a buffer. If you spend beyond this limit but remain within your arranged overdraft, you will be charged interest. Ensuring you pay this money back so your account is back in the black as soon as possible can boost your credit score.
If you breach your arranged overdraft, or spend more than you have in your account and don’t have an overdraft facility, you’ll also pay interest. In this case, you’ll enter an unarranged overdraft. Fortunately, since April 2020, banks have not been allowed to charge more interest on an unarranged overdraft than an arranged one, but beware that dipping into this is likely to damage your credit score, even if you pay it back. You might also be charged for transactions made while in an unarranged overdraft, even if the bank doesn’t allow it to go through.
Interest rates on overdrafts tend to fall between 19% and 40%, with these charges automatically added onto your balance in small daily increments, rather than once a year. Some banks may also simply charge you a flat fee for being overdrawn. Make sure you know your bank’s overdraft fees before going into the red to avoid racking up charges.
You can find out more about overdraft fees in our article How overdrafts work.
Charges for refused Direct Debits or standing orders
If you’ve set up a Direct Debit or standing order but there isn’t enough money in your account to pay it, your bank can refuse the payment and charge you a fee.
Make sure to keep a close eye on your accounts to avoid this. For more information on different ways of paying bills out of your account, read our article What’s the difference between a Direct Debit and a standing order?.
Cash machine fees
Withdrawing money from a cash machine with your debit card is usually free in the UK, although you may face a charge when using some machines, such as those in small shops.
You may also have to pay a fee on a normal machine if you are using a credit card to withdraw money.
Same-day bank transfer fees
Same-day bank transfers usually don’t cost you anything, unless you’re moving a large sum of around £10,000 or more. Then, your bank may charge you for use of the Clearing House Automated Payment System (CHAPS) to process the transfer securely. This is usually around £20-30 per transfer but it will depend on your bank.
Foreign transaction fees
Your bank may charge a fee of around 1-3% for foreign transactions, such as withdrawing cash from machines or making purchases while abroad. There might also be a currency conversion charge. Before you use a card abroad, it’s worth ensuring you have one that doesn’t charge these fees. There are several debit, credit and specific travelcards to choose from that don’t charge any additional fees for overseas spending.
One-off service fees
Your bank may also charge for the following one-off services:
- Stopping a cheque.
- Getting a banker’s draft.
- Ordering a duplicate copy of a bank statement.
- Requesting a reference from the bank.
However, your bank should let you know about any additional charges beforehand if you request any of these services, or any other with a fee attached.
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Finally…
Your bank or building society should give you information that details all of its fees when you open an account. It also has to let you know in advance if any of these fees are going to change. If you’re unhappy with your bank’s service and/or the charges on your account, read our article Should I switch my bank account? to see whether changing to another provider could be worthwhile.
If you think you’ve been charged a particular fee in error, contact your bank online or by phone to request a refund.