Interest rates go up on overdrafts
February 24, 2008
Banks are trying to claw back more and more of their charges by adding or increasing various fees for account holders, and according to recent data one of the charges that has been increased by many if the UK’s bank is the interest fee charged on an overdraft facility. According to recent data over the past year a variety of banks increased their overdraft interest rates, which means that borrowing in the form of an overdraft will cost the consumer more money.
Overdraft borrowing has seen an increase of up to three percent over the past year, whereas the four interest rate rises applied by the Bank of England only amount to one percent. In some cases banks are charging a total of up to four times the base interest rate, which can make overdraft borrowing extremely expensive. Often, bank customers do not even look at the amount of interest that they are being charged on their overdraft borrowing, so these sly increases often go unnoticed.
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.’
Consumers are urged to try and avoid using their overdraft facilities on a regular basis, as the banks are making huge profits on this type of borrowing, and in addition to this are still charging fees on exceeding an overdraft limit despite the fact that many customers are claiming these fees back. Two of the leading banks that have raised overdraft fees by three percent since August 2006 are HSBC and Lloyds TSB.
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