Vigilance can combat errors in bank charges

The outrage that flowed from news of AIB's foreign-exchange misadventure last week was arguably a lot less shocking than the overcharging muddle itself.

It makes sense, after all, that the general populace should rise up in arms at any sign that their trusted banks could have control over a little more customer money than they should.

However, consumers bear almost as much responsibility for tracking their own cash as the banks do for guarding it safely.

The advice in this regard is fairly predictable but, unless you can answer yes to all of the following questions, then you could be in need of guidance.

1. Do you know how much your bank charges for each basic transaction?

Each bank has a different approach to charges and it is the responsibility of the customer to check that the correct process has been followed.

In the case of Bank of Ireland, for example, customers can pay 28 cents for each transaction (e.g. an ATM withdrawal) or a flat quarterly fee of €11.40 for up to 90 transactions.

2. Do you have an overdraft and, if so, do you know how much it costs?

Overdrafts can be wonderfully convenient for consumers suffering from a cashflow problem and they tend to be substantially cheaper than borrowing on a credit card.

Mr Pat Shallow of Finalysis, a consultancy that specialises in advising corporates on their bank dealings, says the most important thing for a consumer to establish about his overdraft is how exactly the interest is charged.

This should be detailed on your monthly bank statement, but may not always be easy to understand.

If this is the case in your situation, do not hesitate to contact the bank for a clear explanation of their overdraft terms.

There is also always a chance that administrative error could have led to the wrong rate being applied. But before concluding that this has occurred, it will be worth casting an eye over the agreement that facilitated the overdraft in the first place.

If, for example, you have remained overdrawn for longer than you said you would, the bank will be justified in charging an additional penalty rate of interest. And these "unauthorised borrowings" can be expensive.

3. Did all of your direct debits come out last month? Are you certain that they only came out once?

Missed direct debits can be highly problematic, particularly when they relate to an ongoing financial commitment such as a mortgage or a health insurance policy.

It can take several months for the receiving party to become aware of the mistake, by which time the financial or other product in question may have lapsed. This would be a particularly unwelcome result in the case of an SSIA, for example.

The flipside of checking that direct debits have gone out is making sure that they have only gone out once. Repeated payments can be the result of simple computer error and should be watched extremely carefully.

4. How about transactions made with your debit card - can you account for all the debit withdrawals (or deposits) on your account?

This is arguably the most dangerous area of consumer banking, with the growing popularity of Laser-based transactions making it hard for many consumers to keep track of electronic withdrawals.

Unfortunately, however, the only real way to ensure that your bank statement is correct is to keep a paper record of all relevant transactions (including "cash-back" withdrawals) so that they can be checked off against your monthly bank statement.

5. Do the ATM withdrawals accord with your records too?

The problem with ATM statements is that they tend to be printed on overly-large pieces of paper that will immediately crowd out a consumer's wallet or handbag. One alternative way to make sure that the ATM transactions listed on your bank statement match your experience might be to establish an ATM habit, whereby you withdraw the same amount from the same bank at the same time each week. Receipts from withdrawals outside of this pattern would then be the only ones you need to keep to make sure that your statement is correct.

6. Are you aware of the cost of your chequebook?

After the Budget in 2002, the stamp duty that must be paid on personal cheques rose from 8 cents to 15 cents a pop. For administrative reasons, this duty is charged when a chequebook is issued rather than when a cheque is written. This means that the customer can expect to see a small lump sum debited from their account when they receive a new chequebook.

The thing to watch here, however, is that a new chequebook is only issued when you need it, since you only want to pay the Government duty when you have to.

Thus, if you find that your bank has automatically issued a new chequebook and debited the stamp duty from your account when you are not quite finished with the old one, it might be worth giving your branch a call to delay things. The bank will not argue with a decision to return the unwanted chequebook and should automatically reimburse you for the stamp duty charge.

7. If your account bears interest, are you certain that it is being paid at the correct rate or at the right time?

Competition has been heating up in the interest-bearing deposit account sector of late, as consumers begin to expect a little more of a return on their bank savings.

Although deposit accounts bearing interest of 2 per cent or more are fairly easy to find, it has become more important than ever for consumers to make sure that they are receiving the interest payment that is due.

Do not hesitate to ask your bank to give you a breakdown of exactly how it has calculated your interest at any time. It is also important to ensure that the interest is being paid at the right time of the year.

Some institutions will raise the rate on offer for funds that are on deposit for a longer period, so timing can end up being more crucial than it might initially seem.

7. On your credit card statement, are you sure that you are receiving as many days of "free credit" as you should be?

The appeal of credit cards is based on the notion that they allow us to spend somebody else's money every month without incurring a charge of any kind.

The maximum number of free credit days on offer is usually 56, although few consumers are actually sufficiently organised to draw the full benefit from the facility because it would require them to make a purchase the day after their receive their credit card statement from the previous month.

The more average consumer, on the other hand, will make a purchase, say, about two weeks before a statement is due and will then have about three weeks to pay the bill.

This will give them about 40 days of free credit, provided that the rules are being applied correctly by the credit card company. As always, it will be up to the customer to double check that they are.

8. If you have investments, are you completely clear on the management fees that are being charged?

It is a brave man that tries to fully comprehend all the management charges that are levied on his investments, with the area usually littered with complications.

As with all other areas of finance, however, the only way to ensure that investment fees are being correctly applied is to have some understanding of how they work and when they will be applied.

The best way to gain this information is to prise it out of the investment company in question, by nagging if necessary. And don't worry about asking stupid questions - it is your money.

9. If you are making payments to a leasing or hire-purchase scheme, are you sure that they have been properly calculated?

Mr Shallow of Finalysis recommends that consumers be particularly aware of the pitfalls that can be attached to this type of scheme.

They should not be surprised, for example, at the penalty that might be attached to an early termination of the scheme and return of the leased property.

They should also be aware that leasing or hire-purchase agreementshave a fixed term that can not be broken for free, even if the reason for the break is that they want to pay off the purchase early and in full.

Mr Shallow advises that customers should avoid this kind of situation by being fully aware of all possible charges before they take out the lease or hire-purchase product in the first place. He acknowledges that it might not always be easy to get clear explanations from financial providers, but says it is also incumbent on the companies to answer queries as long as they are neither "frivolous nor vexatious".

10. If you deposit cheques in your account on a regular basis, are you convinced that they are being "cleared" on time by your bank? How long does clearing take?

Despite the modern-day prevalence of electronic banking, many Irish consumers continue to queue up at their bank every week or month to deposit cheques into their bank accounts.

Unless the cheque is drawn on a foreign account, it is reasonable to expect that it will be cleared within (at the outside) five working days. In practice, this period is usually reduced to three days, or even overnight, if the cheque is drawn on an account held with the same bank as the deposit account.

It will be worth the customer's while to make sure that these time limits are respected by their bank in all cases. This will be of special importance where the deposit account in question bears interest.