Our £3m bill for sneaking into the red

Never mind the cost, many of us continue to slide into the red without the permission of our bank. A survey in Which? magazine reveals that banks raked in an astonishing £3m on un-authorised overdrafts last year.

According to the research, one in four people have used an unauthorised overdraft in the past year, with nearly two-thirds of these doing so more than once.

But you simply can't afford to forget to be remiss. At NatWest - which charges 33.8 per cent interest for unauthorised overdrafts - being £50 in the red for three days would cost you more than £95 in interest and fees.

Perhaps ignorance is to blame. Three out of five of those surveyed by Which? had no idea what overdraft charges their bank imposed. Presumably if they did know, they would request permission beforehand.

An authorised overdraft at NatWest costs 17.69 per cent interest if you borrow up to £1,000. While this is nearly half the cost of un-authorised borrowing, it's still rather expensive.

A glance at our "best buys" tables reveals that you don't have to pay any interest at all on an authorised overdraft of up to £2,500 with Alliance & Leicester for 12 months. After this time, interest is charged at 6.9 per cent. However, to qualify for this deal, you must pay at least £1,000 per month into your account and be aged at least 21.

The next-best deal is offered by Nationwide: 6.75 per cent on authorised overdrafts (23.9 per cent unauthorised). Halifax charges 8.9 per cent (28.8 per cent) if you credit your account with at least £1,000 a month.

Alliance & Leicester (6.9 per cent) and HSBC (14.8 per cent) charge the same rate on all overdrafts, authorised or not, which makes life far less confusing for customers.

When choosing an account, check the overdraft charges. As well as the interest, a number of banks impose punitive fees every time they bounce a payment. For example, Barclays and NatWest charge £25 for each cheque or direct debit that takes an account over its limit, even if it isn't paid.

Also ask a bank how it calculates interest. Some, including Bank of Scotland and the Halifax, charge the unauthorised rate on the full amount by which you are overdrawn - even if part of the balance is within an agreed overdraft. Which? gives this example: a Halifax customer with a £250 overdraft facility who went £1 over their limit would be charged 29.8 per cent on the full £251.

As with any financial product, shop around for the best rate. And request an overdraft facility even before you need it.