Banks raise overdraft interest rates by significant levels
July 24, 2007
Recent reports have indicates that overdraft interest rates have been hiked up considerably by banks over the past year, going above and beyond the interest rate rises enforced by the Bank of England in some cases.
The past year has seen some bank raise overdraft interest rates by around 3% in some cases, making a significant difference to the amount that the consumer has to repay in order to benefit from an active overdraft.
Some overdraft interest rates currently stand at a whopping 20%, which is nearly quadruple the base interest rate. Many think that these rapidly rising overdraft interest rates are yet another way for banks in the UK to recoup some of the profits lost by having to return illegal bank charges to customers.
Capped credit card penalty fees have also seen banks lose huge amounts of revenue, and again tactics like this can help them to try and claw back some of this.
The concerns rise in light of reports that indicate that many consumers fail to realize that their overdraft interest rates have even been put up, and end up paying higher fees without being fully aware.
Banks are also slated because of their speed at applying interest rate rises in full when it comes to borrowing such as mortgages, loans, and overdrafts, but failing to act so quickly – or in some cases at all – when it came to applying the interest rate rises to savings.
According to one industry expert: ‘A few providers have taken full advantage of the opportunity to increase their rates, but instead of passing on the extra costs of the base rate rise, many have exploited the situation.’
Alan Wright
24th July 2007
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