Bank overdraft charges are 'too complex'

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If you go into the red, it’s almost impossible to work out how much it will cost you. Consumer group Which? put that to the test and asked volunteers – including a maths PHD student – to calculate the charges of an unauthorised overdraft for four different banks.

The research published today reveals they were only able to get seven out of 48 charges correct.

Which? chief executive, Peter Vicary-Smith, said: “Bank charges are too complex and impossible to compare.”

Researchers found each overdraft had a myriad of complex rules and additional fees. Lloyds TSB’s fees were particularly confusing, Which? said, with three different types of fees on top of the interest charged.

Frighteningly, people could end up paying more than five as much for going into the red with the wrong account.

Anyone making one payment from their account while being overdrawn for just two days in a row in a month would be charged £50 at the Nationwide building society, for instance. Meanwhile at the Halifax the charge would be just £10.

The highest current account unauthorised overdraft fee – at £150 a month - is charged by First Direct and HSBC.

The same overdraft and account usage at Barclays would attract charges of £66.

Many banks are also using expensive daily fees which produce outrageously high APRs.

RBS, for example, charges £6 a day, equivalent to an APR of 2,190 per cent.

“Bank charges are still too high,” said Mr Vicary-Smith. He called on the government to make the new financial regulator - the Financial Conduct Authority - to be held accountable for putting a stop to unfair overdraft charges.

“The regulator must be a strong, open and proactive watchdog that stands up to the banks, not a lapdog,” said Mr Vicary-Smith.