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Interest on overdrafts 'up by 10%'
A recent analysis has revealed that the amount of interest paid on authorised overdrafts has risen by ten per cent in two years.
Andrew Hagger of Moneynet.co.uk took the focus away from high bank charges on unauthorised overdrafts and found that even customers who are playing by the banks' rules are being hit by heavy interest rates.
According to Mr Hagger's findings, at the beginning of 2008 a customer who was overdrawn by £1,000 for six months would pay £69.25 in interest.
This equates to an interest rate of 13.85 per cent.
But the same scenario today would see costs rise by more than ten per cent so that the customer was charged £76.63.
The money expert commented: "No doubt lenders will point to increased risk and default levels as a result of the spike in unemployment seen during the recession. However as and when the economy returns to a stronger footing and unemployment falls, I'm not convinced that the cost of borrowing will recede."
He added that while savings returns are falling, the cost of loans, credit cards and overdrafts is rising, leaving "many people disillusioned with financial services providers in the UK".
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Andrew Hagger of Moneynet.co.uk took the focus away from high bank charges on unauthorised overdrafts and found that even customers who are playing by the banks' rules are being hit by heavy interest rates.
According to Mr Hagger's findings, at the beginning of 2008 a customer who was overdrawn by £1,000 for six months would pay £69.25 in interest.
This equates to an interest rate of 13.85 per cent.
But the same scenario today would see costs rise by more than ten per cent so that the customer was charged £76.63.
The money expert commented: "No doubt lenders will point to increased risk and default levels as a result of the spike in unemployment seen during the recession. However as and when the economy returns to a stronger footing and unemployment falls, I'm not convinced that the cost of borrowing will recede."
He added that while savings returns are falling, the cost of loans, credit cards and overdrafts is rising, leaving "many people disillusioned with financial services providers in the UK".
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Published: 23/02/2010
The information in this article was correct at the time of publication and contains time sensitive data and links, it may not be accurate at the time of reading.