This means that the Office of Fair Trading will not now be able to investigate the fairness (or otherwise) of unauthorised overdraft charges.

Clearly this news is a blow for the millions of banking customers who stood to be able to reclaim billions of pounds in bank charges.

It’s also pretty bad news for the claims management firms who appear to have cropped up in recent months specifically to handle these claims, some would say unnecessarily.

Good news for some

It is good news, however, for the banks and their shareholders, which includes the taxpayer in a number of cases.

The banks stood to lose up to £2.6 billion in annual revenues from this source – a huge amount of money, but not much in the overall scheme of things when it comes to banking profits.

Barclays alone made a profit of nearly £3bn in the first half of this year and HSBC reported a similar figure. The UK banking sector makes somewhere in the region of £20bn in profits every year.

The myth of ‘free’ banking

One possible consequence of the banks losing their case this morning was an end to ‘free’ banking. Of course banking is not and never has been ‘free’.

The charges associated with using banking services might not be particularly explicit, but they certainly exist and can be substantial in some cases.

Here are just a few of the ways you pay for banking services, even if you have not suffered unauthorised overdraft charges.

1 – Fees for premium accounts

You’re probably familiar with this deal. Banks might not charge explicit fees for conventional current accounts but they do charge them if you ‘upgrade’ to a premium account.

These typically come with a bundle of services you might or might not purchase elsewhere. Often this will include breakdown cover, travel insurance, mobile phone insurance and commission-free currency exchange. Oh, and of course a shiny debit card.

If you go to the open market and research the individual cost of each service, it might look like a reasonable deal in comparison. The problem arises when you do not actually use all of the services or they are services you would not have purchased ordinarily.

For example, you might find your mobile phone is already insured as part of your home contents insurance and you can just as easily exchange your cash for foreign currency at the Post Office with no commission charges.

2 – Lower interest rates on deposits

This is a big source of profit for the banks. When you deposit money with them, either within a current account or a savings account, the rate of interest you receive will be less than the amount of interest or investment return they will earn on your money.

Apathy is an important part of this source of profit for the banks. They might attract savers with a market leading interest rate on their savings account, but then after a year or more reduce this to an uncompetitive level. They do this because they know most customers will not bother to move their money to another bank. They profit from your apathy.

The best way to minimise this cost of banking is to keep your accounts under regular review and move them when you need to move them. The more proactive bank customers become when it comes to getting the most competitive interest rates, the more competitive each bank will need to be to retain their customers.

3 – The higher cost of borrowing

As well as savings, there is a margin when it comes to borrowing.

When you take out a personal loan, mortgage or credit card, the cost of borrowing (the interest you pay on your debt) is much higher than what it costs for your bank to lend you the money.

Banks also make profits from you by charging arrangement fees and redemption fees on loans. In addition, they like to bolt-on expensive insurance policies when selling debt.

4 – Uncompetitive financial products

Perhaps the least explicit way in which the banks made money from their customers is through the sale of uncompetitive financial products. This includes protection policies (including life assurance) with uncompetitive premiums and investment products with high charges and poor performance.

Banks typically offer financial products from one provider or, at best, a limited panel. Because of this, the terms available on these products are unlikely to be the best across all areas. The only way to ensure you consistently get the best terms is to use an independent financial adviser, or at least shop around to get the best deal.

Martin Bamford is site editor of BrilliantWithMoney and a Chartered Financial Planner at Informed Choice. You can follow him on Twitter @martinbamford.

There are over 3,000 investment funds and more than 230 fund management groups based in the UK alone. These range from household names to little known boutiques offering specialist expertise in a niche investment area.

Assuming you are planning to do more than simply pick the top-performing fund from last year (a mistake many investors continue to make) there are five important questions you should ask before investing in a fund. Here they are.

1 – Where does this fund invest my money?

Different funds invest money in different areas. Some invest in a single asset class or investment sector. Others invest across a range of asset classes, so-called multi-asset funds.

By understanding where your money is being invested, you should be able to work out how much risk you are taking with your money and also how the fund you are considering fits in with your overall investment or pension portfolio.

A good guide to where a particular fund is investing is the IMA Sector in which it sits. The IMA (Investment Management Association) is the trade body for the UK asset management industry. They allocate every fund in the UK to a specific sector based on the objectives and holdings of that fund. Examples of these sectors include Sterling Corporate Bond and UK Equity Income.

When you look up the fact sheet for a fund, it should be very clear about where the fund invests. This usually forms part of the objective statement for the fund. It might cover a much wider range of investment types or areas than the fund manager will typically use, which means they are able to invest there but might not always do so. Increasingly fund managers want the flexibility to move money around depending on market or economic conditions. Depending on how much control you want over where your money is actually invested, this might be a positive or a negative factor.

2 – What are the charges?

Never invest in a fund until you understand exactly what you are paying and who you are paying for the privilege. Investment funds typically come with two different charges – an initial charge and an annual management charge, the AMC.

The initial charge is the up front cost of investing in a fund. It can range from 2-6% and often includes an element of commission for the adviser recommending the fund. If you are investing without advice (on an ‘execution only’ basis) then you should ensure the initial charge is heavily discounted.

A form of initial charge is the bid/offer spread. This is the difference between the buying and selling price of units, and can be as much as 5%. This is one to watch out for, particularly on funds where there is no explicit initial charge or the initial charge has been discounted for some reason.

The annual management charge (AMC) is the amount deducted from the value of your investment each year and paid to the fund management group for managing your money.

Once again, this charge can often include an element of commission for the adviser or salesman selling you the fund, so look for a discount if you are investing directly. AMCs vary from 0.3% to 2.5% per year, and once they reach around 1.5% typically pay around 0.5% out as commission; sometimes more, sometimes less.

A more accurate measure of how much you are actually paying each year for fund management is the Total Expense Ratio (TER). This includes the cost of other expenses paid for by the fund, in addition to the AMC. Funds are not obliged to publish this figure, and not all choose to do so, but where they do it should give you a better idea of the real cost of the fund.

Some funds have a performance-related fee in addition to the AMC. This concept came from the world of hedge fund management and it not yet very common for mainstream investment funds. A typical performance-related fee might be 20% of the fund gain above a set benchmark. I’m personally not a big fan of these, particularly where the benchmark used is modest, but also because they might encourage fund managers to take greater risks with your money. They also tend not to penalise fund managers for failure; they still get paid the AMC if the fund performs poorly.

Another cost to look for is an exit charge. These are more common on institutional share classes where there is no entry cost to invest in the fund but a fee is charged when you leave.

3 – How consistent has the performance been?

Past performance is not usually a very good measure of how well a fund might perform in the future. The risk warning you will always see when investing about past performance not being a good guide to the future is there for a good reason. In fact, there is well documented academic research that shows a fund which performed well in one year is likely to do poorly the following year. Investors who chase performance are usually on to a losing strategy.

A much better measure of a fund is consistency of performance.

If a fund manager has been posting similar results, relevant to the sector, for three, five or ten years then there is a chance they will be able to repeat this consistency in the future. Of course it is not guaranteed that they will continue to do well, but a fund manager who has delivered consistent performs in the past has at least demonstrated their ability.

4 – How large is this fund?

Size isn’t everything, but when you are selecting suitable investment funds, size is one factor you might want to consider.

Investment funds vary in size from the very small (maybe only a few million) to the gigantic (several billion pounds of assets under management). Filtering out the extremes of fund size can make real sense.

If an investment fund is small this should tell you one of two things. Firstly, it has not managed to attract much money from other investors. Are other investors avoiding the fund for a good reason or is it really the best kept secret in the world of investment management?

Secondly, will the fund management group keep the fund open for the long term? Small investment funds tend to be those that get ditched by fund management groups or at least merged with others to create bigger funds.

Big funds, which have attracted many investors, face other problems. Once an investment fund gets to a certain size (say, £1bn) the fund manager might start facing some difficulties.

A really big investment fund can be more challenging to manage as investing the money in the best ideas can move individual share prices. As a result, the fund manager might not be able to invest the fund assets exactly as they might like. Getting large amounts of money out of investments that have gone wrong could be equally as challenging.

5 – Who is managing my money?

This is not always as clear as it seems. A key distinction is between a fund run by a fund manager and one run by a whole team at the fund management group. Both ’star manager’ and team-based approaches to managing funds have their attractions, but it is important you know who is ultimately responsible for making the decisions about where your money is invested.

Knowing who is managing your money should allow you to look at their background in more detail. If they have a relatively short track record at the helm of their current fund (say, less than five years) then you should take a look at the experience of their previous fund. You can even look at fund manager (rather than fund) performance on the Citywire website.

Some funds are promoted by one fund management group but the actual management of the money is outsourced to another group or manager. This is more common when the fund is investing in overseas equities, where local management of the money can really pay dividends. What this approach might mean is a household name promoting the fund but a tiny boutique actually managing the investments on a day-to-day basis.

Martin Bamford is site editor of BrilliantWithMoney and a Chartered Financial Planner at Informed Choice.