Force banks to warn us when we hit the red

Barclays customers are the latest to be hit with confusing changes to their overdraft charges. From June, the bank plans to charge its 5.5 million current account customers with daily fees for being in the red, instead of the current arrangement of charging interest.

The move could see those of us who go into the red regularly being charged less as excessive fees have been scrapped, but those who keep to agreed limits could end up paying more.

The changes are an example of how complicated overdraft charges are and the fact that, compared with other forms of borrowing, most overdrafts are actually poor value.

That notion is not a new idea. But it has been confirmed by the Financial Conduct Authority, which concluded last week that overdrafts not only do not offer good value but, worse, they confuse people with complicated charging structures.

The CityWatchdog’s damning conclusion was published after it investigated the £8bn overdraft market. Its research showed that using an arranged overdraft can quickly become a habit, with many consumers giving little thought to how much it actually costs them or the fees they’re being charged.

The fact is that overdrafts can be much more of a rip-off than payday loans. That’s because the millions of us who slip into the red every year probably have little idea how much the cost will be.

Frankly, unless you examine your bank statement closely, you may never even find out how much you’ve been stung with for becoming overdrawn. It’s time that charges were made clearer so that people can compare different borrowing options more easily.

But I’d also like to force banks to contact all those who go into the red, to alert them to the impending charges. And importantly, I’d make them give customers time to put their accounts back into the black and avoid excessive charges.

It’s time to end the banks’ practice of profiting secretly from our current account usage – or misusage.

s.read@independent.co.uk

Twitter: @simonnread