Banks' dirty tricks revealed
It is often only when it is too late and you have been landed with a charge that you realise the true power of the small print.
Whether you have been with the same bank for years, or have diligently scoured the comparison websites for the best deal, banks and credit card providers have an array of sneaky tricks up their sleeves to catch you out.
Sarah Routledge checks out the most common to help you avoid a frustrating call to customer services.
Closing your account
Banks have the right, along with any other commercial organisation, to choose not to do business with their clients anymore. This can be for any reason whatsoever - provided it is not unlawfully discriminatory - and could be because you do not use the account enough.
In other words, your bank could close all your accounts and give you just 30 days' notice.
However, there have been complaints from consumers posted on forums that some banks are doing this without notice, or with just a few days' warning.
This is against the Banking Code, and if you find yourself in this position, you can complain to the bank and to the Financial Ombudsman if you are getting nowhere.
Taking money to pay debts
If you have an account in credit with one institution and you also have a debt, the bank is within its rights to take money from your account to pay the debt - without your consent and with no warning.
This also applies if you have a joint account - so you could end up paying for someone else's loan.
It could also cause big problems if you were putting aside money to pay an important debt - such as your mortgage payment - and your bank takes that cash to pay a lower priority debt, such as a credit card balance.
This is known as the 'right of set-off' and although is usually only used in extreme circumstances, charity Citizens Advice has reported the practice is on the rise.
"Though relatively small in number, we have seen a 25 per cent rise in cases reported by bureaux where banks have moved money from clients' current accounts in order to pay off debts owed on other accounts, credit cards or loans," says CAB spokesperson Moira Haynes.
"This often results in real hardship for our clients or the inability to pay other, more pressing debts."
There are conditions the banks must stick to if they are going to do this, Ms Haynes adds.
Banks "should acknowledge that income should only be used to repay 'non-priority' debts once provision has been made for any 'priority' debts" and "should leave the customer with sufficient money for reasonable day-to-day expenses, taking into account individual circumstances," according to the Banking Code.
However, the CAB has seen several cases where a client has been pushed into deeper debt by their bank's actions.
One bureau reported a case where a client had two personal loans with the bank that they were struggling to repay, so the bank had been taking all her benefit money to pay for the loans. The client was left without money to pay for the basic necessities of life, and her rent and council tax arrears increased.
To avoid this situation, make sure you keep any savings, or joint accounts, that you need in a separate bank. If you are struggling to make repayments on your loan, contact your bank as soon as possible to arrange a repayment plan.
Pushing products
You receive your new bank card in the post, with an accompanying letter urging you to call a number for activation. You call the number, and receive a sales pitch for an insurance product to go with it. Sound familiar?
Staff at some banks are allegedly encouraged to use 'scare tactics' to persuade customers to sign up for payment protection insurance, or ID theft protection - regardless of whether they actually want, or need it.
And this is set to get worse, according to some reports.
A Lloyds TSB team leader in insurance, speaking anonymously at a conference of international bank workers organised by the UNI Finance Global Union, which represents 237 trade unions and three million workers worldwide, recently stated as demand for financial products is waning, staff are being pushed into selling insurance.
As demand for financial products fell, sales targets for insurance, "and cover that people do not need," were being increased, the staff member told the conference.
"We need the confidence to sell to meet people's needs. The principle focus, though, is having to sell. People work late so they can fit in customers to sell products," she continued.
Confusing deals
Another common complaint is the deal that sounds too good to be true. and is. Many banks offer regular savings accounts with significantly higher rates of interest than ordinary instant access accounts.
Provided the customer sticks to the rules and makes regular contributions, the savvy saver could be enjoying interest rates double or triple the amount they are used to.
But the catch is the amount of money you are allowed to deposit. Usually, there is a monthly ceiling - and if you try to go over this, you will be penalised. As a result, you only earn a full year of interest on the initial deposit.
Additional deposits will only attract interest for the remainder of the year, resulting in a complex sum to work out how much your eventual sum will earn over the year.
If you want to know the rate of interest that your total sum will earn at the end of the year, a rough guide is to take the final amount and halve it. Then apply the interest rate (remembering to account for tax) and this will be approximately the amount you will earn over the year.
Credit cards
Credit card providers have a whole raft of tricks to get the customer to pay more than they are expecting.
Unless you pay off your entire balance every month, you could quite easily get caught out by some of these.
One of the sneakiest is called negative payment hierarchy. This is where the payment you make goes on the cheapest debt first, leaving the more expensive ones unpaid.
This means if you have a credit card deal with a rate of 0% on balance transfers but a higher rate for new purchases, you will have to pay interest on anything you buy - even if you pay for that purchase straight away.
This is because the money you pay will go on paying off part of the balance you transferred, which is being charged at 0%, instead of the new purchase, charged at the higher rate.
You would have to clear the whole balance to stop being charged.
Michelle Slade from Moneyfacts said: "The order of repayments is probably the biggest sneaky trick. You pay off the cheapest debt first, so the more expensive debt remains on the card longer."
To avoid falling into this trap, you could use a credit card that pays off the most expensive debt first - such as Nationwide's - or take out a second credit card to use for new purchases.
There are other tricks to watch out for, Ms Slade adds.
"Taking cash out on a credit card can be extra expensive. Not only are you charged a much higher APR (it's also the last thing you pay off with the order of repayments), interest is charged from day one. There are no interest-free days like you would get on purchases. You are also stung with a cash advance fee of around three per cent, with a minimum fee of £3."
"The Lloyds TSB Advantage MasterCard has no interest free days, so even if you paid the balance off in full at the end of the month you would still be charged interest.
"Some providers have been known to charge for low usage, so if you just have the card in case of emergencies you can be stung with a fee (usually around £25)," she says.
Unfair treatment
If you feel you have been treated unfairly by your bank or credit card provider, chances are you are not alone. Complaints against financial services companies have been rising during the downturn and fees can soon stack up into serious debt.
Some mistakes can be avoided by an extremely thorough read of the terms and conditions that come with any service, and you should never feel pressured into signing for something you do not understand.
But if you do feel your agreement is unfair, check the Banking Code to see if it conforms to the rules. Then you can complain first to your bank, and if it still cannot be resolved, to the Financial Ombudsman.
And of course, you can always get in touch with us if you have a story to tell.
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