If you can resist the temptation to over spend this Christmas it may save you a small fortune in crafty bank charges.
It can be easy to mistakenly run up bank charges and slip into debt if you're not 100 per cent up to speed with when your bank charges you a fee. Here are 4 examples of how a bank will charge a fee and an approximate idea of how much it could cost you.
Store cards. I've said this before and I'm saying it now, whatever you do this Christmas do not under any circumstances take out a store card in order to get a 10 or 20 per cent in-store discount. The average APR on a store card is 29 per cent compare this to an average credit card APR of 15.9 per cent APR. That's nearly twice as much interest. Any 10 or 20 per cent discount you get in-store will be totally wiped out by that staggering 29 per cent APR! Forget it.
Withdrawing cash on credit cards is another massive ‘no-no’. You won't be laughing when your credit card bill comes in January and you see the separate ‘handling cost’ or ‘handling fee’ the bank charges for withdrawing cash. Often up to 3 per cent of the amount withdrawn, so if you take out cash a few times you'll be charged for each withdrawal. This is of course on top of the Cash Withdrawals APR charged. Forget it; it's cheaper to make purchases with the credit card instead.
Credit card cheques. It happens to everyone; you get that new credit card in the post and the next day your envelope of credit card cheques arrives. A pack of 10 cheques with your name on - blank cheques! Sound good? Again a handling fee of 3 per cent is charged on credit card cheques.
Overdraft charges. Many of the banks have withdrawn the ‘buffer’ or free overdrafts that come with current accounts. If you were overdrawn by a couple of pound the bank wouldn't charge you their standard £25 fee. However this benefit has been withdrawn on some current accounts so make sure you're not sailing too close to the limit on your current account this Christmas.
These are really only a few of the ways banks make money from you. The best thing to do is read all the terms and conditions but most important are the fees and charges and APR amounts charged. Read the small print!
Simon Duffy writes for the Financial Blog a UK Finance Blog talking about all aspects of personal finance.