Press release:

Brits hit by £300 million in unarranged overdraft fees

  • One in eight (13%) consumers have dipped into their unarranged overdraft in the last year[1] costing an average of £33 each time[2]
  • Almost half (46%) of those charged for using their unarranged overdraft called their bank to complain[3] – with two thirds (62%) getting an immediate refund[4]
  • Over a quarter of those contacting their bank to deactivate their unarranged overdraft were told they couldn’t do so[5]
  • With two thirds (67%) of consumers wanting to be able to turn off their unauthorised overdraft facility[6], uSwitch.com is calling for all banks to give customers the right to opt out and avoid these extortionate fees.

One in eight consumers (13%) have been stung with a combined £300 million in unarranged overdraft fees over the last year[1], yet banks are preventing customers from getting rid of this costly credit facility, according to research from uSwitch.com, the price comparison and switching service.

Most consumers will incur unarranged overdraft fees when they spend beyond their agreed overdraft limit[7]. The research reveals that on average consumers are charged £33 each time they overspend, but for 5% of those affected the fees exceed £100[2] – even though the average they were overdrawn was a mere £60. The most common reasons given for people slipping beyond their account limit are paying household bills (24%) and the weekly grocery shop (10%)[9].

In an attempt to recoup the fees, almost half (46%) have called their bank to complain[3]. While nearly two thirds (62%) were successful in getting a refund on the charges, nearly half of those who called their bank were told the fees would only be waived the once[4]. Just a fifth of complainants were offered options such as balance reminders or text alerts, to prevent them incurring further charges in the future[4].

Over half (53%) of consumers would rather be left red-faced at the counter by having their card declined than incur a fee as a result of slipping into an unarranged overdraft[10] and two thirds (67%) think banks should let customers turn off their unauthorised overdraft facility[6]. Yet this isn’t currently standard practice, with over a quarter of those who contacted their bank being told they were unable to deactivate their unarranged overdraft[5]. A further quarter of consumers didn’t know that this was even an option at all[11].

uSwitch.com is calling on all banks to offer every customer the ability to opt out of their unarranged overdraft, so they can avoid these costly charges and better manage their finances.

Tom Lyon, money expert at uSwitch.com, says: “Banks are raking in millions every year from unarranged overdrafts and failing to do everything they can to prevent customers from dipping deeper into the red.

“Consent and, ultimately, control over finances needs to be in the hands of consumers. Yet, too many are in the dark about whether they can turn off their unarranged overdraft facility and avoid these extortionate fees. If consumers would rather have their card declined at the checkout than be stung by sky-high fees, they should be given the option to do so.

“We urge banks to offer every customer the option to deactivate their unarranged overdraft. In the meantime, customers should contact their bank and set up text alerts for when their account balance is low, so they can take action before drifting into an unarranged overdraft. Overdraft costs vary widely between banks, so it also pays to compare all the options available to you and switch if you find a better deal.”

— ends —

Notes to editors

Research was conducted by Opinium from 11 to 13 April 2017 among 2,004 UK adults.

 

  1. There are over 72 million active personal current accounts in the UK [Source: Bank of England] 13% of respondents said they had used their unarranged overdraft in the last 12 months. 13% of 72 million = 9,360,000. The average fee charged when consumers last went into their unarranged overdraft is £33. 9,360,000 x£33 = £308,880,000.
  2. When asked “Thinking of the last time you dipped into your unarranged overdraft, how much do you estimate were you charged by your bank?”, the average was £33.
  3. When asked “Have you ever contacted your bank to complain about being charged a fee for dipping into your unarranged overdraft?”, 46% said ‘Yes’.
  4. Those who had slipped into an unarranged overdraft and called their bank to complain were asked “What was the outcome of the query?” – 35% said ‘My bank refunded me the charges’, 27% said ‘My bank refunded the charges – but said they would not do so in future’, 20% said ‘My bank offered to set up reminders / text alerts to warn me about potential overdraft charges in future’. 27%+35% = 62%.
  5. When asked “Have you ever contacted your bank to ask to get rid of your unarranged overdraft i.e. to make it impossible for you to make transactions that would take you beyond your arranged overdraft limit?”, 228 said ‘Yes – and I was able to opt out’, 90 said ‘Yes – but my bank told me I was unable to opt out’. 228+90=318. 90 = 28.3% of 318.
  6. When asked “Do you think it is a good idea for banks to allow people to turn off their unarranged overdraft, so they can avoid incurring fees?”, 67% said ‘Yes’.
  7. Those who had slipped into an unarranged overdraft, when asked ‘Thinking of the last time you dipped into your unarranged overdraft, how much do you estimate were you charged by your bank?’ 8% said ‘£0’ and 18% said ‘Don’t know / can’t remember’ 8%+16%= 26%. Which means 74% of those who slipped into an unarranged overdraft were charged £1 or more by their bank.
  8. When those who had been charged a fee for slipping into an unarranged overdraft were asked “When you last dipped into your unarranged overdraft, how far did you go into it?” The mean amount was £60.
  9. When asked “What was the transaction that you first dipped into your unarranged overdraft for?”, 24% said ‘Household bills’ and 10% said ‘Grocery/food shop’. Six respondents said ‘Bank charges’.
  10. When asked “If, when shopping, you didn’t have sufficient funds in your account for a purchase, which of the following scenarios would you prefer?“, 53% said ‘I would rather have my card declined at the counter, if I avoided being charged for going into my unarranged overdraft’.
  11. When asked “Have you ever contacted your bank to ask to get rid of your unarranged overdraft i.e. to make it impossible for you to make transactions that would take you beyond your arranged overdraft limit?” 27% said ‘No – I thought it wouldn’t be possible’.

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