Overdraft interest rates to top 20%?
Filed under: Current Accounts
Meanwhile many easy access savings rates are paying just 0.10% on a £1,000 balance.
Need to know: Savings
The Mail claims that when the Bank of England slashed the base rate to 0.5 per cent, the average authorised overdraft rate was 18.62 per cent. "It has been climbing steadily, reaching a high in February and going up again in March – the latest available figure – to 19.52 per cent."
Plunging into the red
To put this rate in perspective, a £2,000 overdraft would cost you £390 in fees. Or if you were to compound those fees, they would rise to almost £1,400 during a three-year time span. Bear in mind that these are charges just for authorised overdrafts. It gets even worse if you breach your limit.
However last year the Government did push a voluntary package of measures through with major banks to help curtail overdraft charges if you do exceed your overdraft limit. Barclays, HSBC (including First Direct), Lloyds Banking Group (including Lloyds TSB, Halifax and Bank of Scotland) plus RBS (including Natwest) and Santander all signed up.
Pittance paidWith this is a so-called 'buffer zone' where banks cannot inflict charges for exceeding an overdraft. But there's no limit on the number or amount in charges a bank can charge.
Amongst the recent rash of Bank of England figures there was evidence too of credit being staunched to UK SMEs - lending slipped by £3.2bn in March. The Guardian says it now stands at a level "3.5% lower than a year ago."
Meanwhile Defaqto estimates that the average interest rate paid on a £1,000 balance by UK instant/easy access accounts available this year has varied from 1.21% up to its current 1.25%.
Even worse, according to Defaqto, 22% of easy access accounts pay interest of 0.10% or less on a £1,000 balance.