Some of the UK’s biggest banks are charging 450 percent more for authorised overdrafts than some of their competitors.
Such practices will not be affected by the FCA’s recent fees clampdown because it will focus only on excessive penalties charged for unauthorised overdrafts. Earlier this month, the watchdog criticised those financial institutions that charge people who slip outside their authorised overdrafts more than payday lenders.
Wagestream’s research — covering 16 of the UK’s main current account providers — reveals that there is a massive gulf between the best and worst value authorised overdrafts. The highest fees charged are paid by customers of Lloyds and Halifax. A £1,000 overdraft would attract a £49.80 charge over the course of a month2.
That’s 444 percent more than the cheapest offered by First Direct, which would levy a charge of just £9.15 on a £1,000 overdraft balance over a month. The average for all the banks in the study was £20.50.
Peter Briffett, CEO, Wagestream and co-founder, Finance For Good, commented: “The FCA crackdown on unauthorised overdraft charges is welcome but consumers can’t afford to let their guard down because that inquiry will have no impact on the fees levied for authorised overdrafts.
“It can be incredibly difficult to compare overdraft fees because banks have very different ways of calculating them, from standing usage charges to daily fees and flat interest rates.
“This study shows just how much could be saved, or squandered unnecessarily. The difference between the cheapest and most expensive authorised overdrafts can amount to a huge sum over the course of a year, which exacerbates problems stemming from the payday poverty cycle, as interest charges build towards the end of the month.”