Claiming back bank charges

Accidentally getting stung by high interest rates, overdraft fees, and charges for bounced cheques or direct debit payments can be surprisingly easy to do.

Most people who feel they have been hit with unfair bank charges can claim the money back. With some perseverance, and if you can prove financial hardship, you should be able to claim back on unfair bank charges.

What bank charges can be reclaimed and why

You can claim back on bank charges that arise from:

• going over your overdraft limit

• bounced cheque or direct debit payment

Going over your overdraft limit usually incurs a daily, weekly or monthly charge from your bank. This is usually a small fee of anything between 50p to £5 per day. However, this can quickly add up.

On top of this, your bank may charge you interest daily on those charges on top of your overdraft, so it can be quite easy to rapidly fall into further debt.

If you have any payments that bounce you will likely be charged a fee of anything between £5 and £30 each time. If you have already gone into your overdraft, then this could add to your financial hardship.

These kinds of bank charges can be reclaimed using the free Financial Ombudsman Service. Read more further down under the section "How to reclaim bank charges".

What credit card charges can be reclaimed and why

The rules relating to claiming back bank charges are similar to those for credit card charges.

First, you might be able to claim money back on charges relating to missed payments and going over your credit limit.

Secondly, you would still go to the Financial Ombudsman Service in order to claim back the money if you were unable to convince the credit card company to give you a refund.

These charges are usually £12 or less, each time, even if you only go over your credit card limit by £1, or you miss a payment by one day. It can seem excessively harsh, but prior to guideline changes in 2006, credit card customers could have been charged around £35 each time.

However, if you find yourself being hit with a penalty fee of over £12, you can claim to have been treated unfairly. In many cases, the credit card company may simply give you a refund. If you can prove the charges have caused you financial hardship then this could make your claim more robust.

Who is able to reclaim bank/credit card charges?

Under the guidelines relating to bank and credit card charges, customers who are in 'financial hardship' have a stronger case when trying to claim back money.

You can claim the charges are excessive and unfair, but if you are in financial hardship at the time or can prove that the charges are causing you financial hardship, then you have a better chance of getting your money back.

Proving you are in financial hardship means that several of the following issues apply to you:

• You are unable to pay for food and vital bills

• You are unable to pay back debts

• You have recently had a significant drop in your income, due to losing your job, taking a pay cut, or you or your partner has gone to prison

• You have recently become disabled and have had to increase your spending as a result

• You have gone bankrupt or into debt management

• You are constantly living off credit and need to apply for more

• You regularly need to make credit card cash withdrawals

• You regularly go over your overdraft limit

• Bank charges have made your financial situation worse

You can also reclaim bank charges that are deemed to be disproportionately unfair. As mentioned previously, if you receive a £35 charge for going over your credit or overdraft limit by £1, it would be an excessive penalty.

The Financial Ombudsman Service may be able to help you make a claim in such an event, but these issues are not always that simply. For example, if you regularly go over your limit, even if it's just by £1, then they may not take a favourable view at your claim.

How to reclaim bank charges

If your situation fits under the circumstances listed above, then you can begin the process to reclaim your money by writing a letter to your bank.

In this letter you should explain clearly your situation, when it happened, how much you were charged and why you believe it was unfair.

Let your bank know that if your issue is not resolved then you will take the claim further via the Financial Ombudsman Service.

The bank will usually acknowledge that they have received your complaint and will take a certain number of weeks to review your case before reaching a decision.

They will then either give you a full refund, a partial refund, ask you for further evidence or reject your claim.

If you are asked for further evidence, it is likely you will need to fill out a form detailing evidence of your financial hardship.

Generally, banks will want to avoid having the issue taken further, so they may simply give you a partial refund as a gesture of goodwill.

If your claim does not fall under the financial hardship circumstances listed above, you can still try to make the claim by stressing that you were treated unfairly.

However, if the bank is completely unmoved by your threat to use the Ombudsman, then you could go down the legal route, but this can be expensive and unlikely to prove successful. It may simply be better to write another letter to show your persistence before trying the Ombudsman.

What to do if your claim fails

If your bank or credit charge claim is rejected or you feel the response from the bank was completely inadequate, then it is time to take your case to the Financial Ombudsman Service (FOS).

You would need to explain to them your situation and that you have already complained to the bank. The FOS will then speak to the bank to get their side of the story. If the FOS agrees with your claim, then they could take up their own investigation and attempt to get your money back.

However, if there is a cause for the FOS to investigate further, banks will often try to reach a settlement with you before anything escalates.

You can call the Ombudsman Service on 0800 023 4567 or complain via the website.

Checking your credit file

Although bank charges can quickly add up in cost, they can also have a lasting impact on your credit score.

Your credit report shows your financial history, including utility bill payments and credit card repayments. It also shows when you have missed a payment or exceeded a credit or overdraft limit.

This appears on your credit report and therefore can be seen by other lenders when they are deciding whether to accept your mortgage or credit card application, or even your new mobile phone contract purchase.

It can negatively impact your credit score, so it is important to ensure you check your credit file regularly to see what you need to improve.