The BBA is the voice of the banking industry for all banks who operate within the uk
Understanding bank charges and interest
08/01/2004
No. Charges relate to the amount charged for operating your account or providing a particular service. Interest is calculated on the amount you are borrowing and is payable in addition to charges for running your account.
Interest
This is the price you pay for borrowing money, usually in the form of a bank loan or overdraft. Your bank statement may include a deduction made for "interest".
On a tariff sheet, interest is usually expressed as a percentage of the outstanding balance (that is, the amount of the loan or overdraft). The sum you actually pay will vary; it depends on the amount you owe the bank during the charging period.
Bank Charges
You may also have a regular management fee for an overdraft and you can be charged separate or one-off fees (such as an arrangement fee when a loan or overdraft is first set up. These fees occur because, usually, the bank has had to analyse whether you can afford to repay the set amount and to do a check on your past credit records.)
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