The term service charge covers all charges and fees made by a bank to their customers. The term often relates to charges in respect of charges made for a transaction and related activities. These charges may take many forms, including:
- monthly charges for the provision of an account
- charges for specific transactions (other than overdraft limit excesses)
- interest in respect of overdrafts (whether authorised or unauthorised by the bank)
- charges for exceeding authorised overdraft limits, or making payments (or attempting to make payments) where no authorised overdraft exists
Why do banks charge service fees?
To make a profit and pay operating expenses, banks typically charge for the services they provide. When a bank lends you money, it charges interest on the loan. When you open a deposit account (checking or savings) there are fees for that as well. Even fee-free checking and savings accounts have some fees.
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