BANKING - 24.02.2010

Reducing bank charges

Reclaiming bank charges. Bank charges were very much in the news last year after a shock Supreme Court decision regarding the fairness of charges for unauthorised overdrafts. Although relating to personal accounts, this decision rules out any chance of businesses being able to claim that their unauthorised borrowing fees are “unfair”. However, there are still ways that you may be able to reduce the charges you pay.

Compare budget to actual. Carry out an annual bank charges audit. You can do this by estimating what you consider the bank charges to be based on the amounts quoted in the original agreement with the bank (see The next step for a bank charges calculator to help you do this). Compare your estimate with the actual charges for the year. Investigate any major discrepancies and ask the bank to refund any overpayments.

Annual meeting with bank. You should try to meet with your bank manager at least once a year to review the account. Before the meeting, compare your bank’s charges with other banks and use our calculator to work out whether you would make any savings by switching. If there’s a significant difference, ask your bank manager to beat those of the lowest competitor. Prior to the meeting, also review your facilities and make sure you are not paying fees for any your company no longer needs, such as expired rent guarantees or overdrafts you never use.

Tip. If charges are based on the number of transactions, then reduce the number by combining transactions. For example, using a credit card rather than cheques for 100 payments will only result in one transaction.

Avoid unauthorised fees. The highest charges are always for use of unauthorised borrowing facilities, even before allowing for interest. Use your cash flow forecasts to pinpoint when there might be a cash flow problem and avoid going into unauthorised overdraft.

For a sample calculator for bank charges, visit http://financialcontroller.indicator.co.uk(FC 02.06.01).