If you've not enough money in your account and a payment bounces, you may be able to avoid the associated fee as more banks are to adopt a 'retry' scheme from September where they'll attempt to process the transaction again later in the day.
Last year, seven banks agreed with regulator the Financial Conduct Authority (FCA) to use a "same-day retry system" when a customer's standing order, direct debit or future-dated payment bounces on its first attempt (see our Best Bank Accounts guide, which includes the top accounts if you're overdrawn).
Under the system, banks will try to process the payment again later that same day giving customers extra time to top up their account, which should help them avoid unpaid item fees.
But the seven banks – Barclays, the Co-op, HSBC, Nationwide, the National Australia Group (Clydesdale and Yorkshire), RBS Group and Santander – have now be joined by the majority of big banks with the scheme rolling out from 1 September.
The 29 participating banks and building societies have all pledged to give customers until at least 2pm to top up their accounts before attempting to process the payment for the second time.
The FCA says the move should save customers overall, a total of £40 million/year in late payment fees.
How do banks' retry processes compare?
Despite there being a minimum 2pm cut-off time before a second attempt at payment is made, the actual cut-off time, as well as whether individual banks notify customers following a failed first payment, varies.
MoneySavingExpert.com asked the major banks what their policies will be. The results are in the table below.
How will the retry process work?
|Provider||First payment taken||Will it notify after failed 1st payment?||Retry cut off||Fees||Max no. attempts per payment|
|Barclays||Early hours||Yes, free text alert system||3pm||£8/day||Two|
|First Direct||Early hours||From 10 November||3.30pm||No fee||Two|
|Halifax (i)||Just after midnight||Yes, text alert||3.30pm
||Up to £10, max 3/day||One/day, for a max of 26 days|
|HSBC||Early hours||From 10 November||3.30pm||No fee||Two|
|Lloyds Bank (i)||Just after midnight||Yes, text alert||3.30pm||Up to £10, max 3/day||One/day, for a max of 26 days|
|M&S||Early hours||Yes, attempts to call twice||3.30pm||No fee||Two|
|Nationwide (i)||1.30am - 6am||No, text alerts set for future||2.30pm||Up to £15, max £75/mth||Two|
|NatWest||Before 7am||Yes, text or email alert||2.30pm||£6, max £60 per 30 days||Three|
|RBS||Before 7am||Yes, text or email alert||2.30pm||£6, max £60 per 30 days||Three|
|Santander||Unable to disclose||Yes, online, by phone||4pm||£10, max £150/mth||Two|
|TSB (i)||Just after midnight||Yes, text alert||3.30pm||Up to £10, max 3/day||One/day, for a max of 26 days|
|Ulster||Before 7am||Yes, text or email alert||2.30pm||£6, max £60 per 30 days||Three|
|(i) Unpaid item fees vary depending on account|
What about cheques?
The retry process relates to payments that are 'pre-notified' eg, standing orders, direct debits and future-dated payments, so cheques aren't included as standard.
However, where a cheque payment bounces, some of the banks we asked will retry the transaction before the cut-off time without charging a fee. The following major banks will include cheques under the retry scheme:
- Lloyds Banking Group (Lloyds, TSB, Halifax, Bank of Scotland).
- HSBC, First Direct and M&S Bank.
- RBS Banking Group (RBS, NatWest, Ulster).
Top tips to avoid missed payment fees
Here are the Payments Council's top tips for ensuring you don't get hit by unpaid items fees:
- Review your outgoing payments and if any are regularly leaving your account on an inconvenient date, move them to a more suitable day.
- If you need to pay money into your account, the fastest way is by paying cash in to your own bank or by making a faster payment via your online or phone banking service.
- Payments via phone or online banking will generally go through as a faster payment. However, you should check this with your bank if your payment is for more than £10,000.