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Millions could be owed refunds for unfair overdraft fees – how to claim now

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MILLIONS of people are unknowingly paying hefty overdraft fees.

Three in ten bank customers have dipped into their overdrafts in the past year, with £2.7billion owed to banks in fees, according to exclusive research by YouGov for Sun Money.

Millions of people are unknowingly paying hefty overdraft fees

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Millions of people are unknowingly paying hefty overdraft feesCredit: Getty

But banks charge fees of between 19.5 per cent and 45.21 per cent and the best rates are only for those with top credit scores.

It means millions owe thousands of pounds and are stuck in the red permanently, as there is no cap on the amount banks can levy.

James Flanders reveals how to cut your debt, and the cheapest way to borrow . . . 

HOW TO SHIFT DEBT

IF you’re stuck in an overdraft and have any savings, it makes financial sense to use them to pay it off.

If you don’t have a pot of cash, speak to your bank.

Lenders must help if you’re in financial difficulty.

Consumer champion Martyn James says: “Though they don’t advertise it, it’s possible that your bank could turn your overdraft into an interest-free loan and remove it from your account completely.

“You could then pay back the money at a rate you can afford.”

You could also move your overdraft debt to a money transfer credit card, which may have a lower interest rate or a lengthy interest-free period.

These credit cards allow you to move more expensive debts you already owe on to a new card, and you won’t pay interest on this amount for a set period.

For example, Virgin Money’s All Round Card offers no interest for 12 months and a four per cent one-off money transfer fee.

After the 12 months is up, customers are charged 29.9 per cent APR on any remaining balance owed.

Before applying, use an eligibility checker by a comparison site such as Compare the Market or MoneySupermarket to find out how likely you are to be accepted without damaging your credit score.

CAN YOU GET A REFUND?

IF you’ve been in the red for a long time, or couldn’t afford the overdraft, you may be able to claim a refund of charges.

Sara Williams, founder of advice website Debt Camel, says: “Anyone who is in their overdraft for most or all days of the month may be able to win an overdraft affordability complaint against their bank if this has been going on for more than a year.”

You might also have grounds to claim if you told the bank you were struggling with repayments and it didn’t offer you support, or it raised your overdraft to an unaffordable level.

First, complain to your bank and say you were in financial hardship.

Banks will normally only look at complaints going back six years.

Gather proof of your situation, such as a copy of your credit file — it may show red flags proving you were in difficulty — missing payments — or that your overdraft was not affordable.

You can find a template letter, and a full guide for making a claim, at debcamel.co.uk/get-refund-overdraft.

Your bank has eight weeks to respond.

If it rejects your complaint or you’re not happy with what it offers, you can complain to the Financial Ombudsman Service for free, within six months of getting the letter from your bank.

WHERE TO GET FREE HELP

IF you are worried about debt, talking to someone independent can help.

Free and confidential services open to anyone include:

National Debtline – 0808 808 4000

StepChange – 0800 138 1111

citizensadvice.org.uk

HOW TO BORROW CHEAPLY

YOUR options may be limited if you find yourself stuck and need cash quickly.

Ideally, you will have built up an emergency fund which you can dip into — but sometimes that just isn’t possible.

Before you borrow cash, do your research and find out the cheapest option for you.

It is worth considering a credit union. They are a much cheaper alternative to payday loans, and some can even get cash to you on the same day.

The interest rate offered on these loans is substantially lower than that offered on a credit card or overdraft.

Interest ranges from 12.7 per cent APR (one per cent a month) to a maximum capped rate of 42.6 per cent APR (3.5 per cent a month).

THINK BEFORE YOU BORROW

BORROWING sounds like a simple way to help pay bills – but beware falling into debt you cannot pay back.

It’s always vital to ask yourself if you actually need to borrow before committing to a new credit card, personal loan or overdraft.

If you cannot afford to pay off debt you already have, you should avoid at all costs taking on any more.

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