Mortgage rates are at record lows, personal loan rates have fallen, credit card deals are better than ever and the base rate has been stuck at 0.5 per cent for the past seven years. There’s even speculation that the Bank of England will cut it later this week. So why are current account customers paying through the nose for overdrafts?
Days after it emerged that going overdrawn on a current account without permission can be up to four times more costly than taking out a payday loan, analysis by Moneyfacts has revealed that ‘extortionate fees’ have pushed overdraft costs to a new high.
According to Moneyfacts, even authorised overdrafts can cost borrowers as much as £180 a year (we’re looking at you Halifax and Santander). That’s bad enough but it’s the flat usage fees that really sting.
Traditionally, providers charged interest when customers dipped into the red. I’ve no problem with that. But, over the past few years, banks have introduced a set charge, often in addition to a higher interest rate for breaching agreed borrowing levels.
In July 2008, only 22 per cent of non-fee charging current accounts levied a usage fee for an arranged overdraft, but this figure has now hit a record high of 56 per cent – almost two-thirds of the entire market.
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