David Prosser: Never forget to read the small print

Outlook: This is not an industry minded to give up the revenue from unauthorised borrowing charges without a fight
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The Independent Online

The waterbed principle is alive and well in Britain's banking industry (for those unacquainted with the idea, it is that if you press down on one area of a business's charges, new fees will immediately spring up elsewhere). Though we have not yet had a final ruling from the courts on the unauthorised overdraft charges banks should be allowed to levy, the industry expects bad news. But it is planning ahead – take just two examples of recent days.



First up, Halifax Bank has generously reduced its overdraft charges (or so you might think). In the case of arranged borrowing, the bank now plans to charge a flat fee of just £1 a day. Sounds reasonable until you think about the maths – on an overdraft of £100, say, the charge equates to an annual equivalent rate of 365 per cent. Not such good value after all.

Or look at Alliance & Leicester's Premier 50 Current Account. It is offering a 6 per cent interest rate over the next 12 months, which is pretty generous in the current climate of super low base rates (the Bank of England base rate is just 0.5 per cent, after all). But there's a catch. The rate is only available on balances of £2,500 or less, so the maximum interest you can earn is £150. And the account carries a monthly fee of £10. So your 6 per cent interest rate actually produces a gain of just £30 (or 1.2 per cent).

Neither of these promotions breaks any rules, and Halifax and Alliance & Leicester are hardly alone in offering deals that turn out to be much less attractive once you've read the small print. But the banks' customers should take note: this is not an industry minded to give up the revenue from lucrative unauthorised borrowing charges without a fight.

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