Would you borrow from a payday lender? Probably not, even if you were pretty desperate. Of course, payday lenders say they have thousands of happy customers and that the APRs of 4,000 per cent or more aren't representative of the real costs. But the fact is they're an extremely expensive option. Borrow £200 for 30 days and you could pay more than £65 in charges.
But then again have you gone into the red at your bank without asking it first? If so, do you know what the charges are and how they have added up? If you're with the "wrong" bank, you could have paid a small fortune to a mainstream lender.
With an unarranged or unplanned overdraft, you don't have your bank's permission; you're simply spending their money without asking. And if someone helped themselves to my cash, I probably wouldn't be too happy (but then, I'm not a bank...). And, although banks have rejigged their charges, overdrafts for relatively small amounts can incur significant costs if you don't arrange it first. While some banks offer a positively microscopic interest-free buffer, others are rather more generous.
In all cases I've looked at accounts you don't have to pay for.
Overdrawn for a few days
If you go overdrawn for a day or two, you could pay anything from £10 with Halifax (there's no buffer), £16 with Lloyds, assuming you go overdrawn by between £10 and £25, or £12 with NatWest or RBS. With Nationwide you'll pay £20 and interest at 18.9% AER, but you'll only incur one £20 charge if you end up being overdrawn for the full month (plus interest). There may be other charges if you try to make a payment while you're overdrawn.
Overdrawn all month
If you stay overdrawn all month, you could pay £155 in charges, depending on whom you bank with. For example, with Santander, going overdrawn for a month could mean a charge of £150 (that's its maximum, including fees for unpaid direct debits or cheques). Halifax charges up to £155 (£5 a day with no upper limit), whereas Nationwide will charge you £20 a month for going overdrawn and £15 for each payment that you make, or is refused, while you're overdrawn – with a maximum charge of £75 a month.
Most banks offer a "buffer", which means you won't be charged if you go overdrawn by a small amount, although you may have to pay interest. This buffer varies from £6 with NatWest and RBS, to £10 with First Direct and Lloyds, £12 with Santander and £15 with Nationwide. Banks also shouldn't charge you if you go overdrawn in the morning and get your account back in credit later that day (this was clamped down on by the regulator in the summer). But watch out, because some will start the overdraft charge from 3.30 in the afternoon while others will give you longer to get back into the black.
You'll pay a lot less if you have an arranged or "planned" overdraft. For example, according to Which? you will pay just £17 a year if you have an authorised overdraft of £500 with First Direct that you use for two weeks a month, every month. But, by my reckoning, you could pay well over £100 a year with Santander, for example.
If you're with a bank that charges chunky fees if you go into the red without permission, either change the way you run your bank account or change your bank.