Bank charges and interest


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.)

What will my bank provide free?

Most banks do not charge for the general operation of a personal bank account as long as the balance remains in credit. This means that paying in by machine or at the counter, cash withdrawals, normal clearance of cheques, standing orders, direct debits, paying-in books, cheque books, statements, advice of balances and issuing a cheque guarantee card are all free although there are a few exceptions – check with your own bank.

Every bank is expected to publish a list of transaction charges for general banking services. You can ask your local branch for a list of these. Any time you have a question about charges, your bank should be willing and able to explain:

  • the basis on which it is charged;
  • the charging periods which apply; and
  • how they will publicise any changes made to their charges.

How will I know how much the bank will charge?

The Banking Code obliges your bank to notify you of any charges and interest to be debited to your account 14 days in advance. A full list of charges and interest rates will be displayed at your branch or you can ask your bank for a list of charges at any time. If you have agreed an overdraft limit or loan with your bank, you will have been sent a letter advising setting out the size of your limit, how long it has been agreed for, the interest rate and the charge to be made for running your account.

Why does the bank deduct these charges directly from my account?

Because the bank manages your account, it has the ability to make a debit from that account in payment for services it has provided to you. This is quicker and more efficient than having to send you an invoice.

Under The Banking Code, banks “pre-notify” charges; that is, they give you 14 days advance notice of any interest or charges which they intend to deduct from your account in payment for their services to you.

What can I do if I disagree with the charges being made

You should check your bank statements regularly to see what charges, if any, are being made to your account. If you feel that the charges are not accurate, or that there is a mistake in the way they were calculated, then contact your bank and explain your concerns. Ask them to check the account and send you a written explanation of how the total was calculated.

If you are dissatisfied with the reply, ask to see someone at the bank to discuss the matter.

If you have a formal complaint to make, ask the bank about its internal complaint procedures. Complaints would normally relate to mistakes or poor administration.

If the rates being applied to your account are accurate, but you feel they have been set at an excessive level, you might want to consider moving your account to another bank.