When banks can take your money without your consent

Find out how being loyal to your bank could make you worse off.

Do you remember the 70s advert where the friendly National Westminster bank manager was locked in the wardrobe, on hand to give instant advice?

For those who are too young to remember, this was an advertising campaign to show that whenever you needed help, the bank manager would always be available.

Banking has undergone many changes since then and the bank manager has long since left the wardrobe.

Changing face of banking

Although innovations since then, such as automated teller machines (ATMs) and online accounts, have made banking more convenient, they have moved us away from a personal relationship with those we bank with.  

On the positive side, we no longer need to make unnecessary trips to the bank to make any transactions. It can now all be done by the click of a button, instantaneously.

And even through all the changes that have been taking place over the years, some people still tend to be loyal to one bank in particular.

Your parents have probably used the same bank all their lives and now you continue to bank with them. Of course, you could change banks and look for better deals, but you’ve decided it would be too much hassle changing over all the direct debits.

A lot of people often feel obliged to stay with the same bank they have been with for years and feel disloyal if they look around for better deals.

Dip into your account

Don’t let this stop you from shopping around for what is best for you and your money. Another bank might be offering a better rate of return on your savings or a lower interest rate on credit card repayments. Another important thing to consider is that if you owe money to the same bank where your income is paid into there’s a risk that the bank will take money without your consent.

This is known as the bank’s ‘right of offset’.

A bank can use this right to take money from your account to pay a debt on a different account with them.

If your bank thinks that you may not be able to repay an overdraft they will often wait until a large credit is made, such as a wage payment, and then remove the limit on the account. This could mean that you may not have access to money needed for living costs.

From a bank’s point of view, overdrafts specify that the facility is discretionary, which means the bank can remove or reduce the overdraft at any point. And it doesn’t have to be those with overdrafts that suffer; it can happen if you’ve got maxed-out credit cards as well as missed payments on loans.

Avoid losing your money

If you do have debts at your current bank it makes sense to look at changing to a basic bank account elsewhere, so when your income is paid into the new account you will have control of your money again. A basic bank account is easier to obtain than a current account and it is not possible to go into overdraft.

Not everyone has debts with their bank and if you’re happy with the service then it can pay to stick to the bank you are with. However, it’s a good idea to keep your ears to the ground for new offers or accounts that you could benefit from, especially if there’s the chance a bank could use their right of offset.

If you find you are struggling with your accounts and you need further debt help use our online debt advice facility Debt Remedy.

Do you still have a bank manager stored in your wardrobe? And if you can find the original NatWest advert online let us know, we’d love to see it again!