Banks in the UK have been taking money out of some customers accounts without their permission in order to pay other debts such as credit cards or personal loans.   Banks can legally move money between different accounts without telling them before hand.

The bank are obliged to tell the customer after they have moved the money and for some customers it can be helpful, as it will save them interest charges and late fees.

But for others it can cause serious hardship with some people not having enough money to pay for food or heating.

The problem is that banks are starting to use this “setting off” more, and more people are being affected.  The UK Citizens Advice Bureau says it saw an increase of 25% in the number of set-off enquiries from 2007 to 2010.

Up to 2% of all bank customers in the UK are affected by these set-off payments but the onus is on the banks to ensure they treat individuals fairly.

The problems the use of setting-off can cause are endless.  If you’ve money set aside to pay for direct debits, but money is taken without notice, it could cause these Direct Debits to bounce which could mean Bank Charges and fees.

After the BBA published further guidance to the lending code earlier this year it is expected that banks will be more considerate towards their customers circumstances and make sure there’s enough money left for living expenses.

The Financial Services Authority is planing recommendations including making it illegal to take money from joint accounts or where the money has come from a tax credit or benefit.

If you have been affected by “setting off” or feel that your bank has left you short of money and you’ve complained to your bank no avail, then you should write to the Financial Ombudsman.

The Financial Ombudsman’s job is to adjudicate on the problems between customers and banks. While you can’t challenge the fact that the bank used setting-off, it will take into account whether you’ve ‘been treated fairly’ or put in hardship due to the money being transferred.

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Banks; where would the UK economy be without them?  Bankers have shouldered a lot of the blame for the current economic crisis so lets let a some ways we can beat the banks and save money.  The first thing to remember is that your bank will offer a lot of products but very few of them will be great deals.  Banks rely on customer loyalty so up-sell you things such as credit cards, holiday and car insurance etc.

Tip number 1 – Never get insurance policies from your bank.  these policies will often be over-priced and you can get a much better deal by shopping around.   If you do get a quote from your bank, shop around.  You may well be surprised by the money you can save.

Tip number 2 - Be wary of Credit Cards.  If you have been issued a credit card from your bank, you should ensure that you pay your balance, every month, in full. Otherwise you will get hit with high interest charges. If your bank offers you a 0% interest card, by all means take it but remember they’re not doing this out of the goodness of their hearts.  They are doing this because statistics show that the majority of people will have a balance on their credit card after the interest free period and this is where they make their money.  If you can you should try and get a cash-back credit card.  This will let you earn money out of the banks. Every time you spend on one of these cards, you will earn a cash bonus.

Tip number 3 – Borrow money from other lenders.  As your bank’s loans may not be competitive, you should always look elsewhere to get a better rate on a personal loan.  It can save you hundreds of pounds over the duration of the loan.

Tip number 4 - Exchange your holiday money elsewhere.  If you get your holiday cash  from your bank, you will rarely get the best rates. While they wont be as bad as the airport bureau de change there are better deals to be found. Search online for your currency.  I think you will be pleasantly surprised.  If you’re stuck check out CompareTravelMoney or CurrencyExchangeUK.

Tip number 5 – Loyalty doesn’t save you money.  Being loyal, in many aspects of your life, can be admirable but in the world of banking and money, loyalty rarely pays.  Your bank is a business and more than likely, you are just a number to them.  Do not let a sense of loyalty stop you from getting the best deals.

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