Claim Bank Charges Back - Helping you to reclaim Unfair Bank Charges!

As a High Court judge grants banks leave to appeal earlier ruling, Myra Butterworth looks at what they charge people for, and how we can avoid paying the fees

Bank customers seeking to reclaim unfair charges will have to wait at least another year before getting their money back after the latest twist in litigation this week.

A a High Court judge granted banks leave to appeal against his earlier ruling on the issue. The judge had previously decided that overdraft charges fall under the "unfair terms" in consumer contract legislation.

Which? chief executive, Peter Vicary-Smith, said: "This is a real kick in the teeth for consumers as it just drags out the whole process. It’ll be at least another year before people start to get their money back, during which time the banks will hit us with up to £3.5 billion in overdraft charges.

"The banks should do the right thing now, throw in the towel and start reimbursing the customers they’ve been overcharging all this time."

But customers do not have to wait until the final outcome of the test case to ensure that they get the best possible deal. Those who are fed up with paying expensive charges, or simply want to get the best rate on their current account, should switch to a different bank.

Research by statisticians Moneyfacts reveals how banks are already profiteering by charging customers more and paying savers less. Banks have cut the interest rates they offer those in credit on their current accounts by up to 1.75 per cent while some overdraft rates have been put up.

Michelle Slade, analyst at statisticians Moneyfacts, said: "A lot of the biggest moves have been by the major high street lenders, meaning a large proportion of the population is going to be hit at a time when they can least afford it."

For example, Nationwide Building Society has announced that it is increasing the rate on authorized overdrafts for FlexAccount customers from 9.9 per cent to 12.9 per cent, as of the beginning of June.

At the same time, the rates on many savings accounts have dropped in the last month. Lloyds TSB is just one of the banks that has cut rates on its savings accounts recently – and up to as much as 0.5 per cent on its internet savings account.

Miss Slade said: "Banks are not going to want to lose money and these recent moves show how they are trying to pre-empt the High Court judgment by putting up charges."

Before switching your account, examine the different fees that banks apply as this will help determine which the best deal is for you.

As our table of what banks charge shows, customers at Natwest can end up paying a whopping 29.69 per cent for using an unauthorized overdraft, so this is an account to avoid if you regularly breach your overdraft limit.

Charges to watch out for include "unpaid item fees", which can be as high as £38 if your bank bounces payments such as direct debits, and "paid referral fees" of up to £30, charged, for example, when a bank honours a cheque even though there is not enough money in your account.

Sally Collins, senior investment adviser of independent financial adviser Bestinvest, said: "Bank charges can be a bit of a minefield so it is important to consider what you want from your bank account before finding one that suits you.

"If you are likely to end each month in your overdraft you obviously need to be looking at overdraft fees. Conversely, the cash rich may seek to gain better interest rates by accessing fixed-term bonds or Isas – although the risk here is that you may need to withdraw cash early and incur exit penalties."

She added: "Internet banks tend to have higher interest rates but may charge more if you want paperwork sent out and can be less likely to have a high street presence.

"The credit crisis is showing its effects across the banking industry and the regulators are putting pressure on banks to improve balance sheets after losses. Although it is unlikely this will have a direct effect on explicit bank charges it may impact the interest rates."

Since banks can argue that it costs money to run a current account, if penalty charges are forced down, it could mark the end of free banking, with rising fees for other services. In the meantime, banks claim they are doing all they can to help customers avoid paying extra charges.

Lloyds TSB said the majority of customers do not pay overdraft charges, but added that those customers who find it difficult to keep tabs on their account can opt to register for a "limit alert" text message service, which gives them advance warning if they are about to go overdrawn or are getting near their limit.

In addition, all customers receive a "grace period" during which they can top up their account and avoid paying any charges.

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