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Declare bank charges unfair
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| Bank manager |
The rates on offer vary enormously. HSBC charges 18.8%, Lloyds TSB charges 18.9% and NatWest charges 19.24%.
Somewhat cheaper are Barclays (15.6%), Abbey (12.9%) and First Direct (12.9%).
Alliance & Leicester has done away with interest charges altogether. It instead levies a 50p-a-day fee for every day you are in the red – up to a maximum of £5 a month.
This is cost-effective for those who only use an overdraft for a few days each month.
“A number of high-profile providers use strong headline rates in order to promote their current accounts,” says Kevin Mountford, the head of savings and current accounts at Moneysupermarket.com.
“It’s important that you don’t get seduced by these alone but look at the overall package to ensure you get an account that best suits your needs.”
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But it isn’t just these rates you need to consider. If you sometimes exceed your overdraft limit – even just by a few pounds – you’re likely to get hit with far more punitive interest rates (often up to 30%) plus a raft of additional charges.
Many banks charge up to £35 for just breaching your overdraft limits, a further £25-£35 if they bounce a cheque or payment, plus a £25-£35 fee if they cash such a cheque or payment and this takes you over your limit.
One wayward direct debit which pushes your account £100 over its limit could end up costing you £60 in charges – and this is before interest is added to your rising overdraft, made worse by these additional charges.
It is these charges that are the focus of the ongoing legal action. But ahead of any judgement, a number of banks have already overhauled the way they charge for overdrafts.
