Finding the right bank account What fees do banks charge?

There's no such thing as free banking

There's no such thing as free banking

There is no such thing as free banking in the UK. You can even find yourself paying fees if you always keep your bank account in credit.

Unauthorised overdraft fees

The biggest fees you are likely to encounter are those your bank charges for exceeding your authorised overdraft limit. They can run into hundreds of pounds a month. 

If you’re in danger of going into unauthorised overdraft, speak to your bank and ask for an arranged overdraft or an extension of your existing one.

Charges tend to be high overall, but vary considerably between banks. You’ll typically pay some or all of these fees depending on who you bank with:

Monthly or daily maintenance charge

A charge made by the bank once you go into unauthorised overdraft. Banks tend to charge either a monthly or daily maintenance fee, although some charge a combination.

If your bank charges a monthly fee, it’s likely to be around £20-£30 and you’ll have to pay it for every month in which you at any time have an unauthorised overdraft.

Daily fees are charged for each day you’re overdrawn, regardless of whether you make any further transactions on the account. 

There’s usually a cap on the amount of fees you can incur in one month, although these are set pretty high.

Paid-item fees

These are fees you pay for each transaction you make that results in or increases an unauthorised overdraft. 

So, for example, if your bank processes a direct debit, standing order, cheque or card payment while your account is in unauthorised overdraft, you’ll have to pay this fee.

Unpaid item fees/returned transaction charge

Sometimes your bank may decide not to process a payment while you’re overdrawn. If this happens, you’ll pay an unpaid-item fee. There’s usually a cap on how many your bank will charge per day or per month. And in some cases the fee you’ll pay will vary by the amount of the transaction – so the higher the transaction amount, the more you’ll pay.

Fees for foreign transactions

Most banks charge for using your debit card to withdraw cash from cash machines and to make purchases while you’re abroad.

You’ll usually pay one or more of these charges:

  • Foreign exchange transaction fee on purchases and cash machine transaction, typically around 2.75%
  • A charge for using a cash machine
  • A charge for making a purchase with your debit card

Your bank may also charge a fee if you use your debit card to purchase foreign currency or travellers cheques from anywhere other than your bank. 

Same-day transfer fees

If you want to make a same-day transfer to an account at another bank, check whether you can do so using your bank’s free Faster Payment Service (FPS).

FPS was launched in May 2008 with the aim of making all same-day transfers free. Before FPS, you had to use a Chaps transfer, which would cost around £20-£25.

But not all banks have implemented FPS – and some have, but have imposed transaction limits so that you may still need to pay a Chaps fee if you’re transferring amounts above the limits they’ve set.

Packaged account fees

Some current accounts offer extra benefits in return for a monthly fee – typically between £5 and £25 a month depending on the account. These are commonly known as ‘packaged’ accounts.

Our research shows that you can get the most useful benefits cheaper by shopping around. See our guide to packaged accounts for more information. 

Other charges

Each bank has a schedule of fees that it charges for one-off requests. You can expect to be charged for the following requests. Fees vary but can typically range from £5 to £30.

  • Stopping a cheque
  • Special presentation of a cheque
  • Requesting a banker's draft
  • Requesting copies of paid cheques
  • Requesting a copy of a statement
  • Requesting a bank reference
  • Receiving payments from abroad and sending payments abroad

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