When a person opens a bank account or takes out a credit card they enter into a contract. Bank charges for going overdrawn or for bounced cheques are the equivalent of a charge for breach of contract, known as liquidated damages, and the courts can enforce payment. However the sum must reflect actual costs incurred and not exceed damages the bank suffered due to the breach of contract, otherwise it becomes a penalty, which is unenforceable by the courts. The argument that the charges exceed the customers losses and are not enforceable by law is covered in the Unfair Terms in Consumer Contracts Regulations 1999, Unfair Contract Terms Act 1977 and at Common Law. Some banks argue that charges are a fee for a service, however if this is the case then they must be reasonable under S.15 of the Supply of Goods and Services Act 1982

You can try to claim back any excessive charges, which the law would class as penalties. These will be anything over and above what an infringement costs the bank. Examples are: Â$20 charges for letters sent out informing customers they have breached an overdraft limit, Â$30 for a bounced cheque or failed direct debit when the bank merely incurs the cost of informing the other party; the imposition of large daily fines with interest for going overdrawn.

Go back through your old statements and add up all charges that could be considered excessive. If, like many people, you do not keep statements going back for more than a few months see if you can find this information with your internet banking. If not, write to the bank requesting a comprehensive list of all charges showing what the offence was, the date and the amount, under the Data Protection Act. By law the bank must provide this information in 40 working days. Use This is Money's bank charges letter templates.

It may be that the bank tries to stall you and waits before responding that there is a specific form to fill in. In your initial letter ask if there is a form and for a copy of it to be sent and make a follow up phone call a week later.

Under the Data Protection Act 1998, you are entitled to get from your bank a list of any charges over the past six years. Banks may charge a maximum of Â$10 for this.

However, statements are not covered by the Act, so banks are using this loophole to charge higher fees. Many customers are finding that when they ask for a list of charges, staff tell them this cannot be provided, but old statements can.

The bottom line is, ensure you make it clear that you're using the Data Protection Act to request of list of charges. Otherwise you could find you're being charged more than you need to.

This should always be the first move and many people are often surprised what persistent correspondence can achieve. This is Money has created a special template for you to use. Make sure you fill in all the relevant parts, keep a copy of all correspondence and call up a few days later to check it has been received, noting the time, date and name of who you speak to.

The bank should send you a reply within two weeks. If it doesn't, write again and make a phone call straight away. The best result at this stage is the bank deciding to give you a full refund, if it offers only a partial refund, refuse it and write back demanding payment in full.

Alternatively, the bank may send you a letter saying it will respond at a later date. If so, write and call back, stating that a set two-week period has already passed and if you do not hear a definitive answer within a further 14 days you will take court action.

Bank Action says in half of cases the bank will bluff and write back claiming the charges are not unlawful. Increasingly banks are replying to customers saying that they are mistaken and cannot reclaim their fees in an attempt to bluff them into not taking action.

At this point you are moving from writing letters to initiating legal action. Visit Bank Charges Hell and Consumer Action Group's websites and see what people have to say. Their experience is that this action works, and both have others' experiences and cases that form precedents. Be aware from now on you will incur the cost of starting a claim. But as long as you claim less than Â$5,000, in the unlikely event of actually going to court, it will be heard in the small claims court, where you will not be held liable for the bank's legal costs. For more information visit the Her Majesty's Courts Service website and don't miss our guide to the small claims court.

If you are going to take court action open an alternative current account in case the bank subsequently tries to close your one with them. Also consider switching any personal loans. Our account finder and loan finder can help.

There are two options for making a claim. One is to go to the local County Court in person, the other, far simpler way is through the courts system's Money Claims online service. This allows people to make claims from the comfort of their computer, save details as they go along and pay fees of between Â$30 and Â$120 online. Bank Charges Hell, has two examples of claims that can be adapted to suit your needs, choose either, in person or online claim.

Claimants should also register at Consumer Action Group, which has advice for making a claim.

The bank may now repay the money you have paid in charges. If it ignores your claim, you will win by default after 14 days. In an attempt to bluff, the bank may choose to acknowledge the claim, giving it another fortnight to enter a defence. If this deadline passes without any further action by the bank, you win by default and can demand your money back.

If the bank decides to ratchet things up a step further it may enter a defence, which is often done at the last minute, in this case follow the next steps.

Both Consumer Action and Bank Charges Hell say it is unlikely a bank will go this far. If it does you will receive a court allocation questionnaire. Fill it in and send it back to the court within a week – sending a copy to the bank as well to show them that you, too, mean business. The pressure groups say this is the point where the bank will finally back down by not turning up for the court hearing, thus allowing the claimant to win by default. To find out more, see this report about Lloyds TSB . Consumer Action says if you get a court date you should visit its forum where there is information to help with the process plus advice from others.

There are only two bank charges cases known about in which a bank has gone to court, defended its charges and won. One was a case involving Kevin Berwick against Lloyds TSB at Birmingham County Court. In this case the judge ruled that the bank's charges were in fact legitimate fees for servicing an overdrawn account. As this judgment was from a district judge it is not binding in any other court, which a High Court judgment would be. Consumer Action has said that it was disappointed by this decision but that hundreds of thousands of claims have so far been successful and people should not be put off claiming.

The best way to stop banks ripping you off is not to allow them to issue you with penalty charges. Don't miss payments, don't go into unauthorised overdraft territory and don't go for banks you know mistreat people. Soon banks will have to reduce their charges, but in the meantime don't give them the opportunity to make more money out of you. Keep up-to-date with banking news in This is Money's saving and banking section and visit our Rip-off bank charges message boards section to see how other This is Money users have fared.