Crafty Banks Cost Us £369 A Year

Sneaky banks can do us out of hundreds of pounds each year. Here are some of the worst tricks....

If you think most banks are only interested in fat profits I wouldn't blame you. They have plenty of tricks up their sleeves for swelling their coffers at the expense of ours. Besides unfair bank charges there are many other traps we inadvertently fall into which often come with a heavy price tag. Here are six of the worst tricks that bank play - and how much they can cost you. Failing to pass on base rate cuts to borrowers The base rate is the rate at which the Government lends to banks. So it should follow if the rate falls then we should be able to borrow more cheaply from the bank because the bank can borrow more cheaply from the Government. Everyone should be a winner but alas it doesn't always work that way. Unless you have a tracker loan/mortgage where the interest payable always moves in line with changes to the base rate, your bank is under no obligation to pass on any reduction. So in terms of what this could cost you, let's say you have a mortgage of £100,000. With interest payable at 6.25% your monthly repayments are £659.67. If the base rate is cut by 0.25% and your mortgage interest is reduced to 6%, your monthly outlay drops to £643.69. But with no reduction you would have to pay an extra £191.76 over the year. Ouch! Failing to pass on base rate rises to savers On the other side of the coin, it's usually good news for savers when the base rate rises as they should see the interest paid on variable rate savings accounts increase too. But again unless you have a tracker savings account, your bank is free to decide not to increase its rates. Infuriatingly some banks only get round to it in their own time or you might only benefit from a partial rate rise which means you're missing out on a healthier return on your savings. This time if the base rate moves up by 0.25% but your savings rate doesn't, you lose out. If you have a balance of £5,000 held in an account which pays 6% AER, and bank fails to pass on a 0.25% increase in the base rate (upping your AER to 6.25%), you'll miss out on an extra £12.50 in interest over the year. Charging for withdrawals from so-called 'instant access' accounts This one really gets my goat. Instant access accounts are supposed to let you get your hands on your cash whenever you like for free. But we are seeing more and more accounts where you'll lose interest for the whole month in which you make a withdrawal. Even worse, you'll miss out on interest which would have been earned that month on your entire balance regardless of how much you actually withdraw. How sneaky. If you have a balance of £5,000 in an account which pays 6% AER and you make a withdrawal you'll lose one month's interest which could mean you unwittingly give up £25. BACS and CHAPS BACS and CHAPS are basically acronyms for automatic bank transfers. While these systems are a convenient way to move money around, the costs involved may run to more than you realise. Although BACS is free, transfers are subject to a 'three working days' turnaround. So, the money you want to move is debited from your account on Day One but doesn't arrive at its destination until Day Three. Who do you think gets the benefit of having this cash in the intervening period? Yes that's right, the bank. Given that most of us use BACS all the time, banks do rather well out of the process. Meanwhile CHAPS offer a secure, same-day service which is often used when buying expensive items, such as a car, when a same-day guaranteed payment is required. Hardly surprisingly, the service doesn't come for free and most banks charge a whopping £30 for the privilege. So let's say you need to transfer a payment by CHAPS once a year, that's potentially another £30 down the drain. Current accounts which pay interest of 0.1% (or worse still nothing at all) The rate is virtually negligible so you aren't really earning anything. On a balance of £1,000 you'll earn just £1 and that's before tax! Most of us have a current account with a major high street bank many of which offer miserly rates on credit balances. But if you chose the most competitive account from Alliance & Leicester which pays 6.5% AER (on balances up to £2,500, fixed until 31.01.09) you'll pocket £65 instead, which means you could be losing another £64. Banks that bank on customer loyalty Some banks get away with offering sub-standard products simply because many of their customers stick with what they know. Many of us choose our bank without even considering the alternatives, but often their products won't even get close to the competition. If you save £3,000 in a Cash ISA with a market leader, such as National Savings & Investments, you would get 6.30%. But if you go with another bank instead - Barclays for example - you'll earn just 4.76%. After a year the difference in interest earned means you have just lost out on another £46.20. In total, if you don't take precautions to look after your cash, you could find yourself £369.26 worse off and that's just on the sum of these six tricks after the first year. You owe it to yourself not to let your bank take advantage. So get switching current accounts, remortgaging, shopping around for high-interest savings accounts or whatever it takes to make sure you get the best deals going. More: Tens Banks Accused Of Misleading Customers | Compare mortgages with The Motley Fool Mortgage Service | Find best buy savings account at The Motley Fool Savings Centre.