- One in eight (13%) consumers have dipped into their unarranged overdraft in the last year costing an average of £33 each time
- Almost half (46%) of those charged for using their unarranged overdraft called their bank to complain – with two thirds (62%) getting an immediate refund
- Over a quarter of those contacting their bank to deactivate their unarranged overdraft were told they couldn’t do so
- With two thirds (67%) of consumers wanting to be able to turn off their unauthorised overdraft facility, 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, 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. The research reveals that on average consumers are charged £33 each time they overspend, but for 5% of those affected the fees exceed £100 – 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%).
In an attempt to recoup the fees, almost half (46%) have called their bank to complain. 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. Just a fifth of complainants were offered options such as balance reminders or text alerts, to prevent them incurring further charges in the future.
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 and two thirds (67%) think banks should let customers turn off their unauthorised overdraft facility. 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. A further quarter of consumers didn’t know that this was even an option at all.
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.”