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How to stop your bank account being raided

Money protected by an umbrella You may not know this but your bank can dip into your accounts to settle credit card or loan payments, without your permission.

'Right of set off'

Known as the ‘right of set-off’, David Black from financial research company Defaqto says banks are allowed to take money from any of your accounts you hold with them if you have missed a payment and have sufficient funds in another account you hold with them.

He says: “Banks are allowed to do this if you miss a payment and have savings or a current account with the same bank”.

One way to avoid this is by firstly being on top of your finances so you don’t miss payments but to protect yourself further still, you could ensure all your financial affairs such as credit cards and loans are not held in one place.

So consider keeping cards and loans in different banks to those with your current and savings accounts. (See what the ombudsman says about the right of “set off” here.)

Stop ‘rolling’ insurance renewals

This is when your insurer helps themselves to your cash by automatically renewing your policy for another year.

Whether it’s car insurance or home insurance, this means they get the premium in their pocket, and you lose the chance to shop around for a better deal.

"Always read your renewal quote", is the advice of Malcolm Tarling at the Association of British Insurers (ABI). "If your policy’s set for automatic renewal you could get a nasty surprise if the premium’s gone up."

Once payment has been made you can face cancellation charges if you want to switch to a cheaper deal. 

Use your credit card

Don’t go mad and rack up debts you can’t clear, but if you’ve got a card you rarely use beware because you may be charged ‘dormancy’ fees, which could turn into an unexpected hit on your bank account.

These are penalty fees imposed by some banks if you don’t use your card enough. American Express charge £20 if your card i not used for a year and Santander has a £10 fee after six months.  

Cancel any old cards you don’t use and if you keep one in your wallet for emergencies, use it every six months to avoid these fees.

Cancel bill payments properly

Cancel direct debits with your bank and tell the company you’re paying too.

"Banks can usually cancel payments up until to the due date, but don’t leave it until the last minute or you run the risk of a payment being made", advises Mike Hutchinson from Bacs, which oversees the direct debit transaction process.

If a payment is made by mistake you’re protected by the direct debit guarantee which means your bank must refund the money.

But don’t cancel part way through a contract, say six months into a year’s gym membership, as you may still be liable to pay for the remaining term of the contact, plus potential penalty charges.

Keep your account in credit

This may sound obvious but once you slip into the red you’ll be charged.  Even with an agreed or authorised overdraft you pay charges, although these are much higher if you don’t ask first. Some banks like Halifax charge £5 a day for unauthorised overdrafts. 

If you’re charged there’s nothing to stop you trying to negotiate a refund with your bank, but to avoid the hassle in the first place keep tabs on your account by asking if your bank has a text alert service.

Lloyds TSB offers a text service which warns you when you’re heading for the red so you’ve got a chance to pay money in or extend your overdraft.

Sue Hayward

Carl Chambers

Sue Hayward is a personal finance broadcaster, journalist and author. Sue talks and writes on money matters including chatting on BBC Radio & TV as well as contributing to magazines, websites and newspapers. Sue's also written two books; the latest of which is 'How To Get The Best Deal'.

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