Brits paying £4.7 billion in overdraft fees

01 June 2006
According to a new report from Which? magazine, charges for using unauthorised overdrafts reached a new high last year.

Consumers were charged a total amount of around £4.7 billion by banks for exceeding prearranged overdraft limits.

The magazine survey claims that charges for exceeding pre-agreed limits on overdrafts can result in fines of between £20 and £30 each time, in addition to further penalties of for existing standing orders, direct debits or cheques that are paid by the banks while you are in the red.

HBOS, the Royal Bank of Scotland and NatWest had the highest charges. Given a scenario where the consumer is overdrawn for a period of three days, each would charge a £118 in fees, a figure that includes the incursion of extra bounced payment penalties.

The least heavy-handed bank, according to the Which? survey, was Northern Rock, which would fine customers £28 - just one-quarter of the amount the same indiscretion would cost from the highest-charging banks.

Which? has since written to the Financial Services Authority to claim that the high charges were not justified, as the administrative fees for one bank could not differ so dramatically from another.

A similar argument has resulted in credit card providers being pressured by the Office of Fair Trading to lower their penalty fees for late or non-payments, in line with an appropriate rate to cover lenders' costs.

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