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Hidden bank charges: how to avoid & claim back fees

While banks can help you buy a house and save your money for the future, their services can also come with fees and charges.

While many of these are widely known, some banks charge surprising hidden fees that can take a toll on your finances.

With the cost of living rising, here’s our guide to bank fees, how to avoid them and how to claim them back.

Hidden bank charges and how to avoid them

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What are bank charges? 

To use the services of many banks, you might need to pay fees.

Many of these are upfront and transparent and shouldn’t be too much of a surprise to anyone.

If you have a free bank account, you’re unlikely to encounter many fees, but for holders of a current account, your bank might charge fees for things like withdrawing cash from a cash point or wiring money to another account.  

These are some of the most common bank fees. Unfortunately, however, some banks have hidden charges too.

A hidden fee can be applied to some accounts looking to use a particular bank service.

Often, these fees aren’t widely advertised, and while they are legal, hidden charges can be an unexpected cost to consumers. Particularly as multiple small charges can lead to a lot of money being paid out in a short space of time.  

Why do banks charge hidden fees?

Banks are private institutions offering financial services. In other words, fees help banks make money.

Banks also recoup many of their operating costs via interest on loans and other fees.  

What are some of the most common bank charges?

Many banks charge upfront fees for their services. Often these are small charges and are broadly well known.

Some of the most common include: 

  • Cash machine fees: You won’t be charged for withdrawing cash while using a debit card. Try to withdraw cash with a credit card though, and you will be charged. You will likely also incur interest charges too 

  • Foreign transaction fees: If you use your card abroad, you’ll pay fees that can be up to three per cent of your transaction  

  • Overdraft fees: If you start using your arranged overdraft, you’ll normally be charged a simple annual interest fee  

  • Same day bank transfer fees: Some banks will charge you for transferring large sums of money from one account to another  

But there are also many hidden fees that can catch you out.

Different banks will have different ways and means of making their money, so it’s essential that you pay attention to the small print of any bank you’re with.

Some of the most common hidden charges include: 

  • Insufficient funds fee: If you try to spend more money than you have in your account, you could be charged an insufficient funds fee  

  • Stop payment fee: If you need to cancel a cheque from clearing, you could be charged a stop payment fee, often this is around £11 

  • Inactivity/dormancy fee: While currently only one UK bank charges an inactivity fee, not using an account for an extended period can prove costly  

  • Early closure fee: Close an account soon after opening it, and you’ll likely be charged. This fee is particularly common for fixed-term savings accounts that are closed early 

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How to claim bank charges back

Hidden fees can be frustrating, particularly as we all try to avoid the big squeeze on our finances.

If you’ve incurred excessive overdraft fees or other bank fees, you may be able to reclaim some of the charges.

This process is free, but it can require you to be persistent to recoup some of your costs.  

The first stage to claiming back bank charges is to speak to your bank. Typically, you’ll need to send an email or a letter to your bank asking for them to recoup some of the charges.

Some banks will write off the charges voluntarily as a goodwill gesture, whereas with others you may need to be more persistent.

If you have a strong case, you could even contact the Financial Ombudsman Service who will investigate your case for free.  

Learn more: what is the Financial Ombudsman Service?

How far back can you reclaim bank charges?

You can claim money back over a much longer period than you might think.

There is no official limit from which you can claim back money, but six years is a good rule of thumb.  

How can you avoid bank fees?

Bank charges can leave you with less money, or more money to repay, depending on what you’re being charged for.

While there are no guaranteed ways of completely avoiding bank charges (it’s likely you’ll be charged some at some point).

There are some simple steps you can take to minimise your charges.  

  • Be careful using your card abroad: It’s no secret that using your card abroad can be a very expensive decision. Once international fees, transaction fees and exchange rates kick in, you might find you have been charged a lot more than you expected. Before you travel, you could look into a travel credit card or a fee-free card that reduces the number of fees you will be charged. However, pay close attention to the interest that can be charged on these cards 

  • Shop around: One of the best ways to avoid being charged fees is to stay away from fee-heavy options in the first place. Always pay close attention to the fine print and make sure you understand what fees your bank charges 

  • Fee-free bank accounts: If you have a low or poor credit score, you could look into a fee-free account. These accounts don’t come with an overdraft and don’t come with an extensive range of add-ons, but they will let you have wages paid into the account, withdraw cash, pay regular bills and other essential functions without accidentally racking up hidden costs 

  • Speak to a financial adviser: Speaking to a financial adviser can help you achieve your financial goals, without racking up costly fees along the way  

While bank fees can be frustrating and can’t always be avoided, there are some simple ways for you to achieve your financial goals without being charged unexpected costs along the way. Speak to a financial adviser today. 

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About the author
Kate has written for leading publications and blue chip companies over the last 20 years.