Rip-off fees and how to avoid them

With financial services, the devil is in the terms and conditions. The price may be right, but you could be hit with a punishing fee if you have to change an insurance policy, move mortgage provider, use your credit card or switch phone company. Here's our guide to the fees to watch out for and how to keep them to a minimum.

Car and home insurance

Admin fees are on the up. Research from analysts Defaqto shows that motorists could be hit with a number of fees for very minor policy adjustments such as change of address or marital status. In 2004, only 17 per cent of companies charged an adjustment fee to change policy details, but today that figure has soared to 67 per cent. This culture of imposing fees is spreading to home insurers, with consumer group Which? finding that three out of 10 providers now charge similar policy detail adjustment fees.

Action: Price comparison sites will give you a rundown of most fees that providers charge, but when you have a shortlist you can give each a call and ask what they charge for such things as change of address If you think you may have to change your policy details in the next few months, then factor this cost into your final decision over which provider to go for. You can also save yourself cash by paying the year's premiums in one go, rather than monthly direct debit.

Phone and broadband

Stiff competition has meant that many companies are simply dropping their rates to attract business, then stinging customers with bumped-up charges elsewhere. These can include set-up or connection charges, termination charges and premium rate phone numbers for technical support. If you're tied to a long contract you will also face exit fees if you switch. Another problem is the extra cost for those not paying by direct debit.

"If you pay any other way than direct debit, you are going to face additional monthly charges of about £1 to £5 on top of your usual fee," says Michael Phillips, product director at Broadbandchoices.co.uk.

Action: Pay your bills by direct debit, or use Post Office Home Phone as it is the only company that allows customer to pay over the counter with cash or a credit card without facing extra fees. Check all of the charges including set-up or connection fees to compare the overall cost. see if there's an exit fee for leaving your account before it expires.

Use sites such as Saynoto0870.com to find cheaper or free alternatives to premium customer service and technical help numbers.

Card charges abroad

Many providers charge cash withdrawal fees of about 3 per cent plus foreign loading fees of between 2.75 and 2.99 per cent. For example, using a NatWest Current Account Plus debit card at an ATM incurs a 2 per cent withdrawal fee, plus a 2.75 per cent transaction fee, adding an extra £31.27 in fees to 10 withdrawals of €50.

Action: Halifax Clarity and Santander Zero don't charge for overseas usage. For debit cards, the Nationwide FlexAccount current account is a good bet; at the moment there are no foreign currency charges on purchases within the Visa Europe region. From November there will be a 2 per cent charge and a £1 fee for cash withdrawals, but it is still the cheapest option available. You may also want to consider a prepaid card. "A prepaid card from CaxtonFX gives consumers the most spending power as they have no purchase, withdrawal or foreign loading fees," says Kevin Mountford, head of banking at Moneysupermarket.com.

Mortgages

Ignore mortgage fees at your peril. "There is a trade-off between low rates and low fees. For example, Alliance & Leicester has a couple of cheap tracker and fixed rates but these come with 2 per cent arrangement fees," says Andrew Montlake from mortgage broker Coreco.

Action: Make the most of online tools. Comparison websites and brokers such as London & Country (lcplc.co. uk/calculators) offer free calculators to determine how much a loan will cost with all the fees taken into account, and to show you whether it's worth remortgaging.