15 June 2007
Authorised overdraft rates on current accounts are the latest medium through which the banks are making money, according to finance experts at the price comparison and switching website uSwitch.com.
Nine banks have now increased authorised overdraft rates by an average of 0.93% since the beginning of the year, despite the fact that the Bank of England has only raised its base rate of interest by 0.5%.
Some of the worst offenders have raised their interest rates for overdraft charges to 2% - Halifax and HSBC for example. NatWest was also found to have raised its rate up to 1.46%.
"In anticipation of the OFT's ongoing investigation into current account default charges, many banks are already putting measures in place to recoup the revenue they may lose if fees are capped," explained Mike Naylor, Personal Finance Expert at uSwitch.com.
"These banks have been very sneaky by just increasing overdraft rates and not the in-credit rates and we are pretty certain that the other banks will follow this trend by the end of the year," he added.
He added that Lloyds TSB customers were among the worst affected and that by switching away to a provider that charges lower overdraft rates - Alliance & Leicester's Premier Direct current account for example - consumers with an average overdraft of 677 would save 109.06 in the first year.
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