Simon Read: Don't let banks' sneaky current account charges cost you

Here's a question for you: how much does your bank charge you if you go into the red? OK, I know a lot of you are sensible enough to avoid running up an overdraft, but if you did, how much would it cost you?

It's one of the questions like "how much is a pint of milk?" that can be used to demonstrate how out of touch people are.

Most people I know simply add a carton or two to their shopping rather than buying them individually, so how would we know how much a pint is? In our house, in fact, we actually buy four-pint cartons, which would mean dividing the figure by four to find the pint charge. And even then it's obviously cheaper to buy the bigger carton so the resultant calculation wouldn't even relate to the actual price of one pint. But, hey, life's too short for that, isn't it?

But life should not be too short to be aware of the cost of banking. And even if you do avoid slipping into the red, knowing the cost of doing so could save a packet in the future if you discover your bank will empty your savings if you dare to go a penny overdrawn.

Research published by Which? this week revealed that going overdrawn for just two days per month without permission can cost as much as £900 a year.

Does that sound a shocking amount? Don't worry, it's unlikely that your account charges that much. Unless you have the Current Account Plus offered by Yorkshire and Clydesdale banks. But the point is a valid one about charges. No matter that you know your bank wants to sting you, if you don't know how it will do so, you're likely to fall prey to banking tricks.

So by staying out of the red you'll obviously avoid the big penalty fees. But even if you think you're being clever by staying in credit you could be losing out, Which? warns.

You'll lose out through lost interest and hefty fees for withdrawing and spending cash abroad, the organisation says, citing the popular Natwest Select and Lloyds TSB Classic accounts. It has calculated that customers of the two accounts who stay in credit with an average balance of £1,500 lose out on £63 a year.

That's calculated by adding the lost interest that could be gained in a savings account to charges of nearly £15 for making two £100 cash withdrawals and two £50 direct debit card payments while overseas.

The whole point of all these examples is to remind you to pick an account that is best suited to the way you use it.

If you do need an overdraft every month, then pick an account with the lowest charges. If you keep in credit then find an interest-paying current account without too many restrictions that you could fall foul of.

If you're a regular traveller using your account to pay for foreign hotels and restaurants and withdrawing money through overseas ATMs, then you need to seek out one which charges the least for these services.

s.read@independent.co.uk