Money Insider: Unauthorised bank charges need fixing

A report issued this week showed that authorised overdraft rates have hit a 10-year high. However, before we get carried away with the "shock horror" headlines, the situation needs to be put into perspective.

For example, if you take the case of someone with an agreed overdraft being charged at a market average of 14 per cent and they are £500 overdrawn for 15 days each month, they will pay interest charges of £2.87 per month. If their interest rate was then increased by a further 2 per cent it would mean them having to pay just an extra 41 pence per month.

However, these charges pale into insignificance when compared to the unauthorised charging structures employed by some banks, and this is still the main bugbear. No doubt it is one of the major reasons behind a growing number of customer complaints.

Unauthorised charging is definitely an area where further investigation is needed, particularly when you realise that a £50 unauthorised overdraft for just three days can cost a customer up to £60 for what is a short-term and fairly minor financial indiscretion

With Vince Cable responsible for banking in the new coalition cabinet, maybe there's renewed hope that these unfair and disproportionate levels of charging will be reviewed.

Barclays to reduce rate on best-buy Isa deal

if you're still making up your mind as to where to put your cash Isa money for this tax year, you'll need to act quickly if you want to take advantage of the market leading deal from Barclays.

The Golden Isa 2 pays 3.1 per cent AER, including a fixed 1 per cent introductory bonus for 12 months, and while it doesn't allow you to transfer in your tax-free savings balances from past years, it is an excellent rate.

Hats off to Barclays for giving notice that the rate is to be reduced. Far too often we see products withdrawn or rates cut without any warning. The 3.1 per cent version of the Isa will be available until 1 June and is available to everyone.

Andy Gray, head of mortgages and savings at Barclays, said: "We have maintained our best-buy rates throughout the peak Isa season and we will continue to do so for the remainder of this month, as we know that this is still a popular time for customers thinking about opening Isas."

From 2 June, those buying the Golden Isa 2 will not get the 1 per cent bonus and will receive a core interest rate of 2.08 per cent AER.

First-time buyers need a second opinion

We are finally starting to see renewed activity in the mortgage market for first-time buyers, with competitive new fixed rate deals being launched by Post Office, Britannia and Co-operative Bank in the last two weeks.

It is, however, important for all first-time buyers to speak to a mortgage professional in order to understand exactly how much a mortgage will cost of the full term of the deal.

This need is highlighted by less straightforward products that may look appealing at face value. For example, this week Cheltenham & Gloucester launched a 90 per cent LTV, two-year, stepped rate tracker, and while base rate minus 0.01 per cent until 31 December 2010 looks a fantastic deal, the rate then jumps dramatically to base plus 5.49 per cent.

Lock your funds away with Coventry

Consumers are still struggling to find a reasonable interest rate on their savings with the finest rates usually only available if you're prepared to lock your funds away for a fixed term.

For a one-year, fixed-rate bond, you will be doing well to find an account paying 3 per cent, so this new postal savings account from Coventry Building Society may be a more suitable option for some savers.

The 1st Class Postal (Issue 5) was launched on Wednesday and pays 3 per cent, including a 1 per cent bonus for the first year. You'll need a minimum of £1,000 to open the account and are permitted four penalty-free withdrawals per year. However be aware that the minimum withdrawal amount is £1,000.

Whilst this account won't be right for everyone, it does offer a good rate of interest coupled with the flexibility of penalty-free access, something you wouldn't get with a fixed-rate bond. If you plump for this account, don't forget to make a note in your diary to review how your rate stacks up against other products once your 1 per cent bonus expires in 12 months.

Andrew Hagger is a money analyst at

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

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