Consumers waste £700m in bank fees

Customers of the UK's big four banks are wasting more than £700m a year in excessive interest charges on their overdrafts, according to a new survey conducted by YouGov.

Three-quarters of all UK current accounts have an overdraft facility, of which some 42 per cent are overdrawn. However, those who bank with one of the big four - HSBC, Barclays, Natwest/Royal Bank of Scotland and Lloyds TSB - are paying interest rates of between 14 and 30 per cent a year on their overdrafts, compared to the market-leading rate of 5.9 per cent offered by Alliance & Leicester.

Based on the average UK overdraft of between £400 and £500, YouGov calculates customers are collectively paying £700m too much interest every year.

The worst offenders are Lloyds and Natwest, who charge 18.2 and 17.69 per cent respectively on their typical authorised overdrafts. Rates for those who go beyond their agreed overdraft limit are often as high as 30 per cent.

The survey also revealed that more than one-third of people wrongly believe that they cannot switch banks when they have an overdraft. Simon Ripton, the current accounts manager at Alliance & Leicester, commented: "Most people today see an overdraft as an essential part of their current account and frequently rely on it to support the cost of day-to-day life, so it's astonishing that there is still so much confusion about whether or not you're allowed to switch with an overdraft."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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