Banks halve fees on overdraft accounts

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The banks have cut the price of their Control account, which can help avoid unarranged overdraft fees and put the brakes on overspending.

Clydesdale Bank and Yorkshire Bank have cut the fee on their Control accounts, which are designed to help those that find it hard to budget avoid unplanned overdraft charges.

Previously the account dubbed 'Current Account Control' would set you back £15 a month. But it is now available for £7.50.

Taking control

Current Account Control works like a traditional current account; you get a debit card, can withdraw money from UK ATMs for free and you can pay your bills by Standing Order or Direct Debit.

The only difference is you pay a fee each month to stop payments, Standing Orders and Direct Debits being processed that would take you into an unplanned overdraft and incur unplanned borrowing charges.

So it can help stop you overspending, but if you don't have enough money in your account, bills like your mortgage or rent won't get paid either, which could leave you with a missed payment on your record.

And there might be some situations where payments go through even if you don't have available funds.
While you won't be hit with unplanned borrowing charges, like an unpaid transaction fee, you will be charged interest.

This might happen if you don't have enough in your account to cover the £7.50 charge or you use your card at a retailer that doesn't check if you have available funds for a purchase.

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How it compares

There are a few other current accounts that can be set up to help you avoid charges for mismanaging your money.

With the NatWest Select and RBS Select accounts you can use an optional free service called Overdraft Control, which rejects payments that would take your account into an unarranged overdraft and incur unpaid item or usage fees. So it does exactly what the Clydesdale and Yorkshire Control accounts do, but for free!

Yet Clydesdale and Yorkshire are cheaper than most other accounts that come with this feature.
Lloyds Bank, Bank of Scotland and TSB offer a service called Control, which you can add to their Classic
Account for £10 a month. This add-on makes sure customers never go into an unplanned overdraft by cancelling any payments that might cause this to happen. Halifax also has a service called Control which you can add to its Current Account for £10 a month, which does the same thing.

However, it's worth pointing out again that while these accounts can be set up to stop payments that cause you to overspend, they also stop essential payments for things like your mortgage or rent if you don't have available funds. So you still need to budget carefully.

An alternative could be the Santander Choice Account. For £10 a month it also doesn't charge any unarranged overdraft fees, but it won't actively stop payments that put you into an unarranged overdraft.

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Taking budgeting up a notch

If straying in to the red becomes too much of a regular occurrence you could probably use some help with your budgeting. The lovemoney.com MoneyTrack tool can help you get to grips with exactly where your money is going and how you can cut back and it doesn't cost a penny to use.

But if you really want to take budgeting to the max there are a few accounts around that can help you to be more disciplined with your money, by encouraging you to split your cash into a bill pile and a
spending pile.

The Secure Trust Basic Bank Account is aimed at people that have had trouble opening a bank account before (it doesn't credit check applicants) and want to budget more efficiently. You can seperate your money into your current account for essential payments like bills and load the rest onto a prepaid
MasterCard for spending.

The account charges a £12.50 set up fee and a monthly ongoing fee of £12.50 and you will be charged 50p to withdraw cash using the prepaid card. However, the account comes with the chance to earn up to 4% cashback when you use the prepaid card at over 35 high street retailers, so this has the potential to offset some of the fees on the account.

Alternatively there is the thinkmoney Personal Account, which is also aimed at people that have had trouble opening a bank account before and who want to budget better. It's slightly more expensive at £14.50 per month, or £21.25 for joint accounts, but like Secure Trust's Basic Account there is no credit check to open an account and it encourages you to pay all your bills first by separating your money.

When you get paid or receive your benefits thinkmoney will separate the money for bills into the current account (according to your instructions) and load the rest onto a prepaid MasterCard. But unlike Secure Trust's Basic Account the prepaid card doesn't charge a fee to withdraw cash.

Neither of these accounts come with an overdraft facility just like most basic bank accounts, but neither charge fees for bounced payments.

For more on the thinkmoney account, read The bank account that ensures you'll pay your bills.

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Alternatives for good budgeters

If you are comfortable managing your money then the above accounts won't be for you. Instead you can go for the current accounts that are free and come with bonuses like in-credit interest and cashback.

Nationwide's FlexDirect account for example pays an interest rate of 5% AER for a year on in-credit balances of up to £2,500, far better than all easy access savings accounts, providing you pay in at least £1,000 a month. It also comes with a fee-free overdraft for 12 months.

Clydesdale Bank and Yorkshire Bank's Current Account Direct pays 4% AER on balances up to £3,000 until March 2015 on the same conditions.

For larger balances there's the Santander 123 Current Account, which offers up to 3% AER on up to £20,000. The account also pays up to 3% cashback on Direct Debits for things like your mobile phone bill and utility bills. You can also get a fee-free overdraft for four months with this account.

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