Research from moneysupermarket.com shows that 17 per cent of the UK population are permanently overdrawn and 13 per cent are using their overdrafts more than six times year*. With this many consumers regularly needing to use their overdraft facility it is vital they choose the right type of overdraft for their needs to ensure they are not charged more than necessary.
For example, fixed rate charges are growing more popular with providers and charge a set amount everyday, regardless of how much you are borrowing. These should, in most cases, be avoided by anyone who spends a lot of time in their overdraft. The average customer using their overdraft regularly will probably be better off with interest payments based on the amount they have borrowed.
Kevin Mountford, head of banking at moneysupermarket.com, said: "The industry has tried to simplify the charging structure for overdrafts but has actually left consumers more confused. It is vital people understand that not all providers use the same charging structure and whether they opt for traditional interest charges or fixed fees, the key is choosing the right product for their borrowing needs."
As the table below shows, the costs that consumers would face should they go £500 overdrawn when they have an authorised overdraft in place varies considerably depending on how the overdraft charges are applied.
|
|
1 Day |
5 Days |
15 Days |
30 Days |
|
Provider |
Account |
Authorised Overdraft Rate
(TYPICAL EAR) |
Monthly charges |
Monthly charges |
Monthly charges |
Monthly charges |
|
Alliance & Leicester |
Premier Direct Current Account |
50p per day, max £5 per month |
£0.50 |
£2.50 |
£5.00 |
£5.00 |
|
Abbey |
Preferred Overdraft Rate Account |
12.9% |
£0.18 |
£0.90 |
£2.70 |
£5.40 |
|
Barclays |
Barclays Bank Account |
19.30% |
£0.26 |
£1.32 |
£3.97 |
£7.94 |
|
Halifax |
Reward Current Account |
Up to £2,500 - £1 per day
Over £2,500 - £2 per day |
£4.00 (In-Credit) |
£0.00 |
£10.00 |
£25.00 |
|
Halifax |
Everyday Account |
Up to £2,500 - £1 per day
Over £2,500 - £2 per day
(with effect from 06.12.2009) |
£1.00 |
£5.00 |
£15.00 |
£30.00 |
|
Nationwide BS |
FlexAccount |
18.90% |
£0.26 |
£1.30 |
£3.90 |
£7.80 |
|
Lloyds TSB |
Classic Account Plus |
18.90% |
£0.26 |
£1.30 |
£3.90 |
£7.80 |
|
NatWest |
Current Plus |
19.24% |
£0.27 |
£1.35 |
£4.05 |
£8.10 |
|
HSBC |
Bank Account |
19.90% |
£0.28 |
£1.40 |
£4.20 |
£8.40 |
Kevin Mountford said: "Customers must also understand that there is a difference between authorised and unauthorised overdraft charges. Unauthorised charges are not always made clear by providers and can vary from anywhere between zero per cent and almost thirty percent. In such cases, anyone borrowing without their banks prior agreement could be in for a nasty surprise.
"A common misconception is that consumers can't switch their current accounts when overdrawn. But as long as you manage your account well - even if it's in the red - there is no reason why you won't be able to move to a more competitive product that better suits your needs. Times are tough and anyone paying through the nose on their overdraft should shop around to see if there is an alternative account available that wouldn't leave them so out of pocket."
-Ends-
Notes to editors:
*Opinium Research carried out an online poll of 1,994 British adults from Tuesday 3rd March to Thursday 5th March 2009. Results have been weighted to nationally representative criteria.
** based on an overdrawn balance of £500. Comparing the Halifax Everyday Account to Abbey's Preferred Overdraft Rate Account over one year.
Current Accounts and their Overdraft Charges
|
Provider |
Account |
In-Credit Rate
(AER) |
Authorised Overdraft Rate (TYPICAL EAR) |
Unauthorised Overdraft Rate (TYPICAL EAR) |
Unauthorised Overdraft Rate Charges |
|
Alliance & Leicester |
Premier Direct Current Account |
6.00% |
0%
(Introductory Rate for 12 months,
50p per day, max £5 per month thereafter) |
0.00%
(£5 per day) |
Exceeding overdraft limit fee: £5 per day
Payment review fee: £25 each item |
|
Abbey |
Preferred Overdraft Rate Account |
0.10% |
0%
(Introductory Rate for 12 months, 12.9% thereafter) |
28.7% |
Instant Overdraft Monthly Fee - £25
Transaction £0-£9.99 will cost £5
£10-£19.99 will cost £15
£20-£29.99 will cost £25
Over £30 will cost £30 |
|
Barclays |
Barclays Bank Account |
0.00% |
0%
(Introductory Rate for 12 months*, 19.3% thereafter) |
£22 once in Personal Reserve |
£8 Returned/Guaranteed Transaction Fee, max of 5 per day
(comes into effect once Personal Reserve has expired) |
|
Nationwide BS |
Flex Account |
0.00% |
18.9% |
18.9% |
Unauthorised Overdraft Charge - £20
Unpaid Item Fee - £30
Paid Item Fee - £21.50 |
|
Lloyds TSB |
Classic Plus Account |
2.50% |
18.90% |
18.90% |
Monthly Fee - £15 per month
Daily Fee:- Less than £25 - £6 a day
£25 to £100 - £15 a day
More than £100 - £20 a day |
|
Halifax |
Reward Current Account |
£5 per month |
£1 per day up to £2,500
£2 per day over £2,500 |
0.00%
(£5 per day) |
Exceeding overdraft limit fee: £5 per day |
|
Halifax |
Everyday Account |
0.00% |
£1 per day up to £2,500
£2 per day over £2,500 |
0.00%
(£5 per day) |
Exceeding overdraft limit fee: £5 per day |
|
HSBC |
Bank Account |
0.00% |
19.90% |
19.90% |
1st overdraft in 6 months = free
Subsequent overdrafts = £25
Overdraft Fee -
Up to £10 = no charge
Up to £25 = £10 per item
Above £25 = £25 per item |
|
NatWest
RBS |
Current Plus Account
Interest Paying Current Account |
0.10% |
19.24% |
19.24% |
Maintenance Charge - £20
Paid Referral Fee - £15 (max. £90 per month)
Guaranteed Card Payment Fee - £15 per transaction (max £90 per month)
Unpaid Item Fee - £5 (max. £50 per month) |
*Introductory rate may be withdrawn at any time
Sourced by
www.moneysupermarket.com 26.10.2009
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