Beware these banks if you go overdrawn

If your budgeting goes a little awry at the end of the month, you could find yourself dipping into your unauthorised overdraft.

But such a mistake could cost you dear if you're stung with a large penalty.

Lloyds TSB has already announced changes to its overdraft tariff on selected accounts from the beginning of next month. It is removing the £10 buffer it has until now allowed customers who accidentally slip into the red.

Furthermore, Lloyds TSB, Royal Bank of Scotland, NatWest, HSBC, Yorkshire Bank, Clydesdale Bank and Smile have all recently increased their authorised overdraft rates - some by as much as 2 percentage points, according to financial analyst Moneyfacts.

The Office of Fair Trading is meanwhile looking at current accounts for evidence of unfair charges.

The way customers who dip into their unauthorised overdrafts are charged varies considerably between banks. Most have a buffer zone - of, say, £100 - then levy a one-off fee and higher rates if you go beyond that.

Research by Moneyfacts reveals the danger of picking a bank that is unsympathetic to small amounts of debt. A Lloyds TSB customer with a Classic Plus account who has an unauthorised overdraft of £1 for one day will be charged £30 per day - up to a maximum of £90 per month - and pay interest of 29.8 per cent.

Halifax, NatWest and the Royal Bank of Scotland all levy a one-off fee of £28; Abbey charges £20.

At the other end of the scale, Alliance & Leicester imposes no fee on its customers for minor errors of this kind.

What's worse, as Lisa Taylor of Moneyfacts points out, is that these charges can be the same for all customers of the same bank - regardless of the amount they are overdrawn by. The problem is exacerbated, she adds, by the complex terms and conditions attached to current accounts.

Separately, research by financial comparison service Moneynet shows that banks and building societies are skimming off interest earned on so-called "instant access" accounts by limiting the number of "free" withdrawals allowed a year.

Some providers, for example, impose a penalty of 30 days loss of interest, charged either on the amount withdrawn or on the entire account balance for the month in which any withdrawals are made.

"The onerous withdrawal conditions now being imposed by some banks will result in a huge boost for profits and a colossal loss of interest for customers," says Moneynet's chief executive, Richard Brown.