Unauthorised rates are double authorised rates, MoneyExpert.com reveals
Going over your overdraft limit without permission from your bank or building society will cost you an average 25.4 per cent in interest charges as banks get tough, according to new analysis* by MoneyExpert.com.
But bank and building society customers who negotiate an overdraft before getting into trouble can cut rates to 12.6 per cent, the independent financial comparison website says.
Banks and building societies are currently battling for current account business with a range of special deals including Alliance & Leicester offering zero per cent overdrafts for a year on two of its current accounts.
However at the same time other banks including HSBC, Royal Bank of Scotland and NatWest have raised authorised overdraft rates on some accounts. NatWest increased rates on January 2nd from 18.86 per cent to 19.99 per cent for authorised overdrafts up to £1,000 and from 17.95 per cent to 19.41 per cent for overdraft between £1,000 and £4,999.
And fees for unauthorised overdrafts remain high. Average charges for unpaid standing orders and unpaid cheques are around £32 each.
MoneyExpert.com Chief Executive Sean Gardner said: ìPeople feeling the financial strain after Christmas could be forced to dip into their overdraft to tide them over temporarily.
ìThe message has to be if you are going to use your overdraft make sure your authorised limit is big enough and if it isnít tell your bank before you go over the limit.
ìUnauthorised overdraft rates are punitive at an average 25.4 per cent although banks and building societies will justifiably argue that if you have broken your agreement with them you should be charged a penalty price.
ìSimilarly it remains the case that there are plenty of good deals on bank and building society current accounts that customers should take advantage of. If you are unhappy with the service from your bank then you should move.”
Among the 100 current accounts on the market the lowest authorised overdraft rates apart from one-year special deals are around the seven or eight per cent mark with Bank of Scotland and Halifax, for instance, offering 7.9 per cent on their Moneyback Current Accounts. Nationwide offers 7.75 per cent on its accounts while Clydesdale and Yorkshire Bank charge 8.83 per cent on their Current Account Plus.
The lowest unauthorised overdraft rates are 7.9 per cent and 5.9 per cent from Alliance & Leicesterís Premier and Premier Direct current accounts. However the highest rates are as much as 33.51 per cent.
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* MoneyExpert.com analysis of the Defaqto Aequos Database, 4.01.07