Published: 10/06/2008

Increasing numbers of us are struggling to keep our finances in check, and are finding our bank accounts being put under extra pressure as we try to cope with soaring fuel and food costs.

In the tough current economic circumstances it is more important than ever to keep a keen eye on your current account balance, as the financial consequences of going into unauthorised overdraft, making purchases without the funds to cover them or having items returned by your bank or building society will only inflame what is an already difficult situation.

Bank charges have been very much in the spotlight over the past couple of years and even more so in recent weeks as the Banks and the Office of Fair Trading (OFT) battle it out to see what constitutes a fair charge. In the meantime, it is essential that you check your balance regularly to ensure you don't end up being stung for going over your agreed overdraft limit.

Recent research from moneynet.co.uk reveals:

• The average authorised overdraft rate is 13.4%.
• The average rate for unauthorised borrowing is currently 23.98% (So you can see that arranging an authorised overdraft makes sense and will save you a fortune in interest charges).
• If your bank pays an item for £50 taking you into unauthorised overdraft, fees and interest could cost you over £165 if you don't rectify the position for two weeks.
• The charge could vary between £25.10 and £165.36 depending on who your current account is with.

Lloyds TSB and Alliance and Leicester last year tried to make their charges more transparent by introducing daily charges for unauthorised overdrafts; however, if you don't clear your overdraft quickly with these types of tariff, such fees can soon mount up.

Take the example of an item for £50 being presented to your account. If your bank agrees to honour this payment and you are unable to bring your account back into the black or within your agreed limit for 2 weeks, these are the charges you could be faced with having to pay:


This bill could get much larger if you remain outside your limit for longer and if more items are presented and either paid or returned. This could really set your finances back during what are some of the most testing economic circumstances seen for years.

If you are sailing close to the wind with your overdraft limit, don't ignore the situation otherwise things will only deteriorate further. Get down to your bank or give them a call - it's got to be better than being hit with additional fees and interest that you can ill afford.

With access to your account information available through the branch, ATM machines, the internet, telephone and mobile phone there is really no excuse for you not knowing what your current balance is. In fact it's worth getting into the habit of checking your balance a couple of times each week, this way you should avoid any nasty surprises when you receive your monthly bank statement

If you have already been charged banking fees, and it's a one off, then try asking for a refund; it's worth a try.

For even the most financially disciplined, sometimes an unexpected expense may cause us to slip into the red or go over an agreed limit. To avoid being stung in such circumstances, it's worth setting up an 'in case of need' limit, which will give you that extra flexibility and peace of mind.

Finally, remember that overdrafts are designed to manage short term cash flow problems, not to fund your day to day living and be a permanent feature of your account. If you find yourself constantly overdrawn, it's time to take a long hard look at your budget and to consider moving your borrowing to a personal loan.