COMMENT
The Dangers Lurking In Your Bank Statement

Banks have always been a bit sneaky. Once they've lured us into their clutches with special deals and we've turned into an 'existing customer', we promptly get sidelined as they continue their hunt for yet another much-prized 'new customer'.

I've always thought their worst trick is only citing monthly interest rates for overdrafts on bank statements with no mention of what the charge amounts to as the equivalent annual rate. After all, 1.5% appears so little compared to 19.6%, and it hardly helps you to realise that for, say, a £1,000 debt you'd be paying almost £200 in interest over the year.

And what about those little bombshell announcements that are quietly slipped in with your bank statement along with all that junk mail offering loans or credit cards? One of our Fool readers has just written to us complaining about her Woolwich Openplan current account:

"Yesterday I received a letter ... slipped in with my statement informing me that from 15th July 2005 an interest rate of 1.22% (15.6% EAR) will be charged on all balances within the agreed overdraft.  This includes the £100 interest-free element which will no longer apply. Prior to this the interest rate was 6.79% EAR." 

Not surprisingly, she feels a bit conned because the deal that had first attracted her to the account has suddenly been removed. But, at least she's been alerted to the fact because she reads her monthly statement and the accompanying information properly and so is aware of the latest changes to her bank account. Many people don't and, as a result, get caught out.

Indeed, a friend is currently trying to find out why she and her husband are making repayments on a £10,000 loan that they never applied for nor even received! It took them three months to spot that almost £350 was regularly disappearing from their joint account because neither of them had recently looked at their bank statements. While it's hardly a sneaky banking trick, it does highlight the importance of checking statements.

A sound piece of advice is to regard the arrival of every bill and bank statement as a call to action. Open every bill with the thought: " This is too high - how can I reduce the next one?" and let your bills and statements become triggers to shop around for a better deal. If nothing else, it will alert you to any problems.

Find a better current account in our Banking Centre.