Banks Hit Customers With Increased Overdraft Intereat Rates Despite No Change in Base Rate
Personal_Finance / UK Banking Sep 09, 2010 - 11:48 AM GMTBy: MoneyFacts
Recent figures from the Bank of England show overdraft rates at an all time high.
In the last 18 months, more than a quarter (26%) of current accounts have seen increases in their authorised overdraft rates, despite no change in the bank base rate. (See appendix for full details)
The biggest increase has been experienced by Barclays Additions Active customers, who have seen a 8.4% increase in the last 18 months.
An Additions Active customer with a £1,000 overdraft would have seen their annual overdraft costs increase by £28 to £211 (figures take into account the £300 buffer).
Michelle Slade, spokesperson for Moneyfacts.co.uk, commented:
“Overdrafts customers are an easy target for banks, particularly in the current environment when many people regularly use an overdraft to get by each month.
“While the majority of customers use an overdraft as a buffer facility, some have no alternative but to regularly push their overdraft to the limit.
“It is those customers that will be hit hardest by increases, which will only serve to make a bad financial situation worse.
“Customers are unlikely to complain or switch provider due to a small increase in rate, but when multiplied by the millions of customers each bank has, these rates soon generate increased revenue.
“The UK currently has a high level of unemployment, which is likely to get worse when public sector job cuts filter through.
“The first thing customers forgo when struggling to make repayments is unsecured lending, in particular repaying an overdraft.
“The increased risk of customers defaulting is being past on through higher rates, but if the customer doesn’t default the increase just creates further revenue for the bank.”
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