Don’t get hit with extortionate bank charges for dipping into the red – here’s how to beat them

Royal Bank of Scotland is changing its fees for unauthorised overdrafts, lowering the monthly maximum charge from £150 to £80.

From July 24 the Bank will up the daily charge and the per item charge from £6 to £8, while reducing the number of fees it will charge over a set period.

This is better news for those who rely on overdrafts constantly but not for people who just occasionally dip into the red.

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RBS says customers can avoid unarranged overdraft charges if they sign up to its free Overdraft Control service – which stops people going into an unauthorised overdraft and ensures they don’t get charged at all.

This move comes on the back of the investigation into the current account market by Competition and Markets Authority.

Banks will be forced to clearly display their monthly maximum charge for unauthorised overdrafts.

Industry experts believe this doesn’t go far enough and a cap on the maximum amount any bank can charge should be brought in.

Elderly woman taking money from coin purse
A cap on unauthorised charges would help the most vulnerable

Andrew Hagger from Moneycomms.co.uk says: “For years banks have been hitting customers who can least afford it with punitive unauthorised overdraft charges as a way of retaining what they call ‘free banking’ for the well off.

”No double the CMA investigation is a major influence in the repricing decision by RBS.”

The cost of an unarranged overdraft for 10 days

Source: uSwitch

Andrew believes this is an area that definitely needs looking into.

“For example if you are more than £25 overdraw with TSB or Lloyds Bank you will be stung with a £10 charge per day until you put it right sbject to a maximum of eight days worth of charges – on top of this they will charge you £10 for each unpaid item, up to a maximum of three per day.”

Unauthorised overdrafts are expensive and the charging system for most banks is way too complex.

The cost of an unarranged overdraft for 3 days

Source: uSwitch

Don’t get slapped with these hefty charges.

Make sure you sign up for text alerts from your bank that let you know when your balance reaches a certain danger level and when you might need to add funds.

Apply for an agreed overdraft – these are much cheaper than unauthorised borrowing.

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