Banking – drafts, charges and interest
Article provided by Net Lawman

This article provides information on:
1) bank drafts
2) bank charges and interest

What is a bank draft?
A bank draft is very much like a cheque except that it is drawn at the bank's head office.

	It may require two signatories. These will generally be bank managers;
	The bank issuing the draft will have its name and possibly a hologram printed on the front or back of the draft;
	It can be for any amount;
	The customers name will not appear on the bank draft;
	The bank draft will be made out to the person who is to receive the money.

Organising a bank draft
You need to ask your bank for a draft. You might have to apply in writing and it will be usually used and approved only for pre-arranged transactions, e.g. car purchase, house purchase. The customer will be charged a fee. The fee can be found in the banks tariff of charges.

The bank which issues the bank draft will check that the customer has the necessary funds available to cover the amount of the bank draft. The customers account will be debited with the amount of the draft. The bank draft should not be altered or amended in any way.

The bank may ensure that draft is crossed and the words account payee not negotiable are added.

If someone offers me a bank draft, what should I do?
Bank drafts are cheques drawn by a bank usually on its own Head Office. Payment is guaranteed provided the draft is genuine and has not been lost or stolen.

Drafts go through the normal clearing process like any other cheque. If you are offered a bank draft as payment, do not release the goods until you are sure the draft is genuine and has been paid.

If you are selling a car or similar expensive item, beware of the "buyer" who turns up without notice after the banks have closed - usually a Friday. If the "buyer" offers a bank draft, already made out in your name for the full asking price and wants to take the item straight away (usually he/she says that they live at the other end of the country and are travelling back home that night or the next day), it is highly likely that you could be the potential victim of a fraud attempt.

Ask yourself whether the situation seems logical - would you for instance go to the trouble of getting a bank draft to buy an item without even checking its condition - or even whether it was still for sale? Better to have lost a sale rather than the item itself.

2) Understanding bank charges and interest

Are charges and interest the same thing?
Charges relate to the amount charged for operating your account or providing a particular service. Interest is calculated on the amount you are borrowing and is payable in addition to charges for running your account.

Interest
Interest is price you pay for borrowing money, usually in the form of a bank loan or overdraft. Your bank statement may include a deduction made for "interest".

On a tariff sheet, interest is usually expressed as a percentage of the outstanding balance. The sum you actually pay will vary; it depends on the amount you owe the bank during the charging period.

Free services
As long as you keep the account in credit, most banks will not charge for a personal bank account. Paying in by machine or at the counter, cash withdrawals, normal clearance of cheques, standing orders, direct debits, paying-in books, cheque books, statements, advice of balances and issuing a cheque guarantee card are all free although there are a few exceptions - check with your own bank.

Every bank is expected to publish a list of transaction charges for general banking services. If you want to, ask your local branch for a list of these. Any time you have a question about charges, your bank should be willing and able to explain:

	the basis on which it is charged;
	the charging periods which apply; and
	how they will publicise any changes made to their charges.

Will my bank charge me for any other services even if I stay in credit?
Services such as special presentation of cheques, credit card, stopping a cheque (unless it has been lost or stolen), returning a cheque unpaid due to insufficient funds, replacement statements, issuing foreign currency, issuing bank drafts, arranging overdrafts and accepting foreign cheques for the credit of your account might have to be paid for.

How will I know how much the bank will charge me?
Your bank will advise you of the amount of charges and interest to be debited to your account 14 days in advance. A full list of charges and interest rates will be displayed at your branch or you can ask your bank for a list of charges at any time. If you have agreed an overdraft limit or loan with your bank, it will have sent you a letter advising you of the amount of your limit, how long it has been agreed for, the interest rate and the charge to be made for running your account.

Interest rates which apply to your account may change from time to time. Under the Banking Code, the bank will tell you about any changes at the earliest opportunity either by letter or other personal notice to you, or through notices / leaflets in branches and press advertisements. If this option is used the bank will tell you the interest rate applicable to your account at least once a year.

What can I do if I disagree with the charges being made
You should check your bank statements regularly to see what charges, if any, are being made to your account. If you feel that the charges are not accurate, or that there is a mistake in the way they were calculated, then contact your bank manager and explain your concerns. Ask them to check the account and send you a written explanation of how the total was calculated.

Article provided by Net Lawman