The biggest ways banks rip you off

In a world where everyone is after your money, it's easy to pay out more than you need to. Here's how to avoid getting ripped-off ever again!

These days, when everyone is trying to save money, the last thing you want is to get poor value for money, or to feel like you’ve just poured your life-savings down the drain.

So here, I’m going to show you how you can avoid ever getting ripped off again!

1) The credit card rip-off

With so many different credit cards on the market, it can be a tad tricky to know which one to plump for. However, it’s really important that you choose the right credit card to suit your needs if you want to avoid paying interest when you don’t need to.

Many credit cards charge interest rates in the region of 16%. So if you’re going to be doing a lot of spending, the best way to avoid paying these high interest rates is by choosing a 0% on new purchases credit card, such as the Tesco Bank Clubcard Credit Card MasterCard or the Sainsbury’s Finance MasterCard for Nectar Holders.

Tesco offers 13 months interest-free on all purchases and Sainsbury’s offers 12 months, so you’ll have at least a whole year to pay off your debt without worrying about paying interest. Just make sure you pay off your balance in full before that year comes to an end, otherwise you’ll start paying interest.

Alternatively, if you’ve already got a lot of debt on a credit card and it’s racking up a lot of interest, transfer it onto a 0% balance transfer card immediately and enjoy several months of interest-free payments. The top cards at the moment offer 16 months at 0% interest. So you can relax knowing that you won’t have to pay interest on that debt for 16 months. After all, why pay interest when you don’t need to?

It’s worth pointing out here that you shouldn’t ever spend on a 0% balance transfer card, or transfer a balance onto a 0% on new purchases card, unless the card operates positive payment hierarchy, or the interest-free periods are identical for both balance transfers and purchases. Otherwise you will get caught out by negative order of payment - and trust me, that’s something you don’t want to do.

You should also ensure you never withdraw cash from your credit card - otherwise you’ll be hit with a fee of around 3% and an eye-popping rate of interest to boot – usually around 30%-35%.

Finally, don’t get tempted to take out a store card. Often retailers will offer you a discount of around 10% for signing up to their store card. But these cards have astronomically high rates of interest, so unless you can GUARANTEE you will pay off the balance in full each month, avoid them like the plague!

2) The current account rip-off

If you’re thinking about switching your current account, congratulations! We’re always encouraging our readers to do just that. But when you’re shopping around for the best account, avoid getting sucked in by packaged accounts.

Packaged current accounts offer various perks such as travel insurance, car breakdown cover, maybe even mobile phone insurance or identity theft protection. But of course, they come at a price – usually somewhere in the region of £5 to £25 a month.  

As a result, you need to consider carefully whether you really think the perks are worth it. Will the insurance you receive cover you for everything you need, and is it really the cheapest insurance policy on the market? Or would you save money by simply applying for your own policy?

Personally, I’m not a fan of packaged accounts because I think you’re more likely to be wasting your money rather than saving anything! You’ll be much better off choosing an account which pays you a decent rate of interest. Read Ditch these current accounts – quick! to find out which ones are worth keeping – and which ones aren’t!

3) The overdraft rip-off

Overdrafts can be very expensive. Last year, Halifax introduced a new daily charge of £1 on overdrafts less than £2,500, and double that for overdrafts over £2,500. Unauthorised overdraft borrowing is now charged at £5 a day!

But there’s absolutely no reason to put up with this rip-off! If you need an overdraft, move your money elsewhere and pay less! You can find out more in 5 ways to get an overdraft for free.

4) The insurance rip-off

Make sure you’re not under-insured on your home insurance policy – even if this means you end up paying out more in premiums.

If an insurer discovers you have declared too low a value, it’s within its rights to reduce any payouts proportionately, meaning you won't be able to make a full claim. As a result, you may well feel that all those premiums you've been paying out have been a waste of money. So it may even be worth considering unlimited cover.

You should also check you’re not paying an excessive excess. Although paying a higher excess will bring down the cost of your premiums, if you end up having to make a claim, that huge excess could really hit you where it hurts.

It’s also worth bearing in mind that if you make three claims on your home insurance policy in the space of three years, you’re likely to find it much harder to get insurance. Unfortunately, some insurers frown upon a lot of claims in a short period of time and won’t issue you with a quote. And those that do are likely to charge you ridiculously high premiums.

So if you want to avoid this rip-off, try not to claim unless you really need to – for example, if losing your front door keys means you will only need to pay out a small amount yourself rather than claim on your insurance, this could be the way to go.

5) The banking error rip-off

I may have left this until last, but one of the biggest ways you can check whether you’re being ripped-off is to keep a very close eye on all your banking transactions so that you can easily spot anything that looks suspcious.

Banks do make errors after all. Read Bank error in your favour. Collect £1,000  to find out more.

A really easy way to keep track of your money is with the lovemoney.com online banking tool as this amalgamates information from all your different providers, allowing you to see all your different statements at a single glance, with a single log-in. (You can also categorise all your transactions, so you'll know immediately if some of your spending seems out of place.)

This means that every time you visit lovemoney.com to read our articles, you can quickly log into the online banking service – it really is that simple!

More: The five biggest lies companies tell us

Compare credit cards with lovemoney.com

Compare current accounts with lovemoney.com