Do Overdraft Fees Outweigh Interest Benefits

Have you examined your existing bank account lately or are you looking for a new bank. Whether you have an account that you have had for years you might wan to re-examine your banks current fees. Since you opened your account there may have been some changes and not necessarily in your favour. If you are now looking for a bank account for the first time you will also want to research the many options from several banking institutions.

The large variety of banking fees you are likely to incur can be vast and may take away from any interest you may earn. If you have a habit of putting your checking account into overdraft you may be penalized with some pretty hefty interest rates. They are legal at this time and that is why it is so important for you to read all the fine print when deciding on which bank is best for you. Since not everyone will need the same type of account, you may be acceptable of one type of account that is unacceptable to someone else.

There are some accounts that have such a small amount of interest that you will earn as to be non existent. There are also certain accounts that pay no interest at all and this may be alright for certain people. There are checking accounts that say you must have a certain amount of pounds in the bank. If this is your situation then perhaps a savings account would make more sense for you as you would surely make more interest in this type of account. When you look at Barclays Bank or Natwest Bank they are giving you a paltry 0.1% rate to many it isn’t worth it.

Something else you must take into consideration is if you will have overdraft protection. Depending on your current financial situation this could be devastating to your account management. If you are living very close to pay check to pay check these overdraft fees could be your downfall. The creditors watch this and if you are trying to secure a loan it could prove to be a trouble spot for you. There are many accounts that will provide you with authorized overdraft protection only if you have good credit standing. There are others that will provide you with authorized overdraft, but charge an exorbitant interest rate. Norwich & Peterborough Bank is one of the banks that have no authorized overdraft protection if your credit rating is low. The penalty for this is a whopping 24.9% interest rate there aren’t many people that could handle this. If you have a different account with Norwich & Peterborough though you may be able to get a £500 fee-free overdraft, you can switch your current account to this and receive a 0% interest for six months.

You can see that the amount of overdraft charges wouldn’t take long to over shadow any benefits from an interest bearing account. The Halifax Current Account would penalize unauthorized overdrafts with a 29.8% interest rate. Keeping an eye on your finances and not letting them get away from you is an obvious solution to this problem. Public sentiment can have an impact on what the banks will charge as well. As a rule your banking institution doesn’t want bad publicity and many times they have to back down on these charges. You have to read everything pertaining to the bank account you want and ask questions if you don’t understand something so the worst doesn’t happen to you.

Do you know if you have to hold a certain amount in your account in order to be paid any interest? How strict is your bank about what constitutes when you go into overdraft? If it is by a small amount will you still get the huge interest penalty these are very important questions that need to be addressed before you choose an account. There are some very good accounts out there for you to look into and you shouldn’t be intimidated by the terms of the agreement. The Halifax High Interest Current Account is currently paying up to 6.17% interest and while an authorized overdraft can cost you 15.9% interest you may still have found a perfect deal for you.

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