The top five sneakiest banking tricks

Have you been bitten by one of these banking bugbears? Act now and save money!

Last month, consumers fighting to reclaim bank charges suffered a major setback in the Supreme Court. In short, the Office of Fair Trading (OFT) lost its test case against high street banks, and was told it didn't have the power to determine whether or not overdraft charges are fair.

For a full explanation and analysis of what happened, read Bank charges: The banks have won! followed by Bank charges: It's not over.

This David versus Goliath fight has, rightly, hit the headlines. But it's also important to remember all the other sneaky tricks financial institutions are pulling on an everyday basis.

Overdraft charges are, in fact, just a drop in the ocean of rip-offs we still have to contend with. Some may not be as sensational as the bank charges fiasco, but all of them result in financial providers making a profit at our expense. Keep your wits about you!

1. Poor linked products

Every now and then, a bank or building society advertises a new account that sounds absolutely fantastic. It might be a savings account with an enormous rate, or a current account that promises to be 'fee-free'.

On closer inspection, I almost always come across the same catch: To take out this product, the customer also needs to take out a not-so-special 'linked' product with the same provider.

Very often this linked product involves considerable financial risk (for an example an investment product) or requires a substantial, long-term commitment (like a mortgage).

The Santander brands (Abbey, Alliance & Leicester and Bradford & Bingley) are particularly keen on this approach - so always read the small print of any attractive offers from this bank!

The solution

Be very wary of signing up to any deal that requires you to take out a linked product, particularly if it's for a relatively small, short-term gain.

For example, it's not sensible to sign up for a juicy savings rate that disappears after a year, if it also involves the huge financial entanglement of a pension plan or mortgage for you're not happy with!

2. Loyalty doesn't pay!

Many financial providers routinely discriminate against their existing customers.

This is particularly true in the weird and wonderful world of insurance: New customers are typically offered the best insurance deals, while existing customers who want to renew their policies are charged heaps more - sometimes twice as much - for exactly the same level of cover.

The solution

When your car insurance or home insurance comes up for renewal, don't automatically sign on the dotted line with your current provider. Instead, shop around to take advantage of the sought-after status of 'new customer'. Here at lovemoney.com, for example, you can get quotes for car insurance and home insurance.

When you've tracked down the best possible deal, ask your existing insurer to beat it; and if it's not willing or able to, take your business elsewhere!

3. Pricy packaging

Packaged current accounts are often marketed as a 'luxury' option, designed to reward valued customers and simplify their lives. In fact, many people end up forking out pounds every month for products they could get much more cheaply if bought separately.

As well as being poor value for money, packaged accounts are very often irrelevant to customers' specific needs. For example, there's no point in paying £12 a month for an account which includes worldwide travel insurance if you never leave the UK!

Finally, the components (like insurance) within packaged accounts often come with a host of exclusions, making them far less attractive than they initially seem.

The solution

Steer clear of any packaged current accounts that don't meet your needs exactly.

Even if you find one that does, it's still worth shopping around to make sure you can't get that same combination of products and services more cheaply elsewhere.

4. 'Typical' doesn't always mean you!

When applying for a new credit card, many customers make the mistake of assuming that card's typical APR will apply to them. In fact, this rate only needs to be offered to two-thirds of borrowers for it to be deemed 'typical'.

This means that one-third of customers could be accepted for the card, but charged a far higher rate of interest on any money they borrow.

Customers often get a nasty shock when a 0% balance transfer period ends, and interest is charged on the remaining balance. The 'typical APR' of that card might be 15.9%; but that doesn't stop you being charged an APR of 30% or even more!

The solution

For peace of mind, choose a lifetime balance transfer credit card: One of these will offer you a low rate of interest for as long as it takes to clear your balance.

And if you do go for a 0% balance transfer deal, just make absolutely sure you've cleared the balance before that 0% period ends!

There are so many rip-offs associated with credit cards that they deserve their own article! Read Credit card rip-offs that should be banned to find out more.

5. When a bonus rate isn't a bonus

The rates of many of the most attractive savings accounts are boosted by 'bonus' elements - temporary add-ons to the interest rate which usually disappear with a year.

For example, the West Bromwich Building Society Branch Bonus Account 2 is an easy access account with a very competitive rate of 3.38% APR. Of this, 0.60% is a temporary bonus rate.

Bonus rates are not necessarily a bad thing, as long as they're fixed. You just have to be ready to up sticks and find another savings account when that bonus disappears.

Variable bonus rates are the ones to watch out for. A variable bonus - attached to a variable rate account - leaves you with no guarantees at all. Theoretically, that rate could drop like a stone tomorrow.

The solution

Savings accounts which include variable bonuses don't generally advertise the fact. If you like the look of a particular account and you want some sort of rate guarantee, make absolutely sure any short-term bonus rate is fixed before you commit.

Get help from lovemoney.com

If you want to fight back against financial providers, you've come to the right place.

First, adopt this goal: Reclaim bank charges

Next, watch this video: The worst store card in Britain!

And finally, why not have a wander over to Q&A and ask other lovemoney.com members for hints and tips about what worked best for them?

Compare current accounts at lovemoney.com