Barclays hits customers with huge overdraft fee increases

Interest rates go up days after bank is embroiled in row over bonuses for staff
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The Independent Online

Barclays has slapped higher overdraft charges on two million of its current account-holders, just two days after revealing that its investment bankers will take home more than £190,000 each in bonuses this year.

The fee increases will affect those customers who pay a monthly fee for such extras as insurance policies alongside their standard current account services.

The new charges affect seven account types, five of which are still available to new customers and two which are no longer offered.

The biggest increase affects the "Graduate Account", whose overdraft rates are rising from 9.9 per cent annually to 14.9 per cent, The rate on the bank's "First Additions" account will rise from 14.9 per cent to 18.3 per cent. "Current Account Plus" is going up from 16.9 per cent to 18.3 per cent and the "Premier Life" account is going up from 12.9 per cent to 14.9 per cent. The other accounts are smaller and more specialist but also face hefty interest rate rises. The new charges compare with the Bank of England's base rates of just 0.5 per cent.

On Tuesday, Barclays reported record profits for 2009 of £11.6bn. It also confounded predictions that retail banking operations in the UK – the provision of mortgages, current accounts, savings and loans – would will struggle. While profits were down, the bank still made £612m from those businesses in this country.

At its results presentation, the president Bob Diamond, rounded on reporters for questioning the bank's remuneration policies, saying Britain should be "proud" to have such a successful company. Barclays has vaulted into the top tier of investment banks since it took over Lehman Brothers. However, it faced a storm of criticism over bonuses after admitting that it planned to set aside a bonus pool of £2.7bn despite the Government's 50 per cent one off "super-tax" on bonuses.

Yesterday, Barclays sought to defend inflicting steeper charges on people running overdrafts. A spokeswoman said: "We are always reviewing our rates because we have to get the balance between the cost of providing overdrafts and the increasing risk. These changes affect only a minority of customers who pay for additional services with their current accounts."

Barclays said eight million customers with standard current accounts would not be hit by higher changes, and the bank has also not changed the rates paid by its credit card customers in Britain.

However, customers and union leaders reacted angrily. One Barclays client, who asked not to be named, said last night: "It's absolutely outrageous that just days after lining their pockets they do this to us."

A spokesperson for the TUC, which has campaigned against excessive pay at Barclays, said: "It beggars belief that banks are increasing charges to customers while paying up billions to their super rich bankers.

"Customers will be absolutely furious. Widespread reform of the banking sector is long overdue."