Banks back down in overdrafts row
Banks are backing down in the row over unauthorised overdraft charges, with average rates dropping by more than 5% in the past year, research from MoneyExpert.com shows.
The price comparison website says the average unauthorised overdraft rate is now 20.01% compared with 25.25% a year ago.
Banks are currently waiting for the High Court to rule on allegedly unfair overdraft charges following a court case brought by the Office of Fair Trading after campaigners urged customers to reclaim fees.
And MoneyExpert.com research shows the banks have started to move ahead of any decision although there is a long way to go still.
Around nine providers – including nationalised Northern Rock – still charge 29% or higher for customers going into the red without permission. And 52 of the 136 accounts from 27 providers charge more than 25%.
Sean Gardner, chief executive of MoneyExpert.com, said: “The current account market is changing rapidly with new accounts being launched regularly offering high rates for being in credit and low rates for being overdrawn.
“It is encouraging that average unauthorised overdraft rates have dropped by 5% in the past year. That said though, a 20% rate is still very high and well above the average standard credit card rate. Anyone who thinks they may go into the red without permission should speak to their bank as soon as possible and certainly before they go over their limit as the penalties are still severe for what might be just a one-off mistake.”
Only 41 out of the 136 accounts on the market do not charge a monthly fee for being overdrawn without permission and the average penalty is £22.80. Around 65 of the 136 accounts offer some form of interest-free overdraft. Average charges for a bounced cheque or unpaid direct debit is £28.29.
The highest unauthorised overdraft interest rate is 30.5% from Ulster Bank. Others with accounts charging more than 29% include Royal Bank of Scotland, NatWest, Halifax, Citibank, Yorkshire and Clydesdale.