Take account of the overdraft

ABBEY NATIONAL's survey of overdraft costs has been criticised by rivals who say it is not realistic to assume someone being overdrawn by pounds 500 for a year. Several argued that a customer who wanted pounds 500 of borrowing for a year would be directed toward a personal loan or into a cheaper current account - typically one that pays no interest.

The survey did confirm that someone searching the market for a current account needs to look carefully for one that suits their circumstances. This is even more important as banks introduce charges for customers who keep only small amounts in their accounts. The Abbey itself said last week that it is likely to introduce such charges soon.

Royal Bank of Scotland said its Interest Paying Current Account, which offers free overdrafts of up to pounds 100, was good value for people who keep overdrafts within this limit. It merited the bank a recommendation in a recent Which? report. A bank spokesman said it was normal for customers to overdraw for a few days a month. An IPCA customer who is pounds 500 in the red five days a month through the year would pay interest of pounds 16 and monthly fees of pounds 120.

Barclays said customers who want to overdraw regularly by pounds 500 would be steered into its non interest-bearing Flexible account. It calculated that someone borrowing pounds 500 over a year on this account would be charged pounds 161 - or pounds 57.04 for a personal loan.

Co-operative Bank's Ultra account originally hit the table as the top charger, but the bank has since dropped its authorised overdraft rate on this account to 19.56 per cent a year from 31.4 per cent.

----------------------------------------------------------------- Table: BEST & WORST: OVERDRAFTS ----------------------------------------------------------------- (With advance authorisation) The best pounds 1 First Direct Cheque Account 87.00 2 Halifax Maxim 88.00 3 Nationwide Flex Account 90.00 4 Woolwich Current Account 95.00 5 Abbey National Current Account 112.00 The worst 9 Royal Bank (Scot) Interest Paying/Lloyds Classic 202.00 10 Girobank Keyway 204.00 11 Co-operative Ultra 210.00 12 National Westminster Current Plus 213.00 13 Barclays Interest Option 226.00 The chart shows the cost, per year, for an authorised overdraft of pounds 500, including fees and interest. All accounts interest-bearing. ----------------------------------------------------------------- Source: Abbey National -----------------------------------------------------------------