BBC
More than a third of the money banks make from current accounts comes from interest and charges when customers go overdrawn
Watchdogs are to investigate the £3billion-a-year banks rake in from rip-off overdraft rates.
More than a third of the money banks make from current accounts comes from interest and charges when customers go overdrawn.
Research shows going over the limit can work out more expensive than borrowing from payday lenders.
Now the Financial Conduct Authority is to investigate the market to get a better deal for customers.
Britons were £9.34billion overdrawn at the end of January, figures from the Bank of England show. And nearly half the 61 million current accounts in the UK have an overdraft facility – allowing customers to go into the red.
Figures from industry expert Moneyfacts show rates on authorised overdrafts have risen from an average 12.2% in 2012 to 13.83%, although rates on unauthorised lending have fallen.
Research by consumer group Which? showed it can cost up to £30 to go £100 overdrawn for a month, within an agreed limit, and up to £100 without permission. That compares with up to £37 for borrowing £100 for a month with some payday lenders.
FCA research found many people don’t realise how much overdrafts can cost. Others do not see an overdraft as borrowing and quickly become accustomed to having one. A previous study by the Office of Fair Trading suggested 10% of current account customers are permanently or usually overdrawn.
The FCA said banks may be tempted to raise overdraft limits to make money from interest and charges.
Christopher Woolard, from the FCA, said: “With overdrafts bolted on to more than 30 million current accounts, we want to make sure it is working well for consumers.”
Moneyfacts said: “There is a mix of percentage charges and fees, making it impossible to compare one account with another. This is not a new problem; it is a problem that has only just come to the fore.”
Watchdogs are to investigate the £3billion-a-year banks rake in from rip-off overdraft rates.
More than a third of the money banks make from current accounts comes from interest and charges when customers go overdrawn.
Research shows going over the limit can work out more expensive than borrowing from payday lenders.
Now the Financial Conduct Authority is to investigate the market to get a better deal for customers.
Britons were £9.34billion overdrawn at the end of January, figures from the Bank of England show. And nearly half the 61 million current accounts in the UK have an overdraft facility – allowing customers to go into the red.
Figures from industry expert Moneyfacts show rates on authorised overdrafts have risen from an average 12.2% in 2012 to 13.83%, although rates on unauthorised lending have fallen.
Research by consumer group Which? showed it can cost up to £30 to go £100 overdrawn for a month, within an agreed limit, and up to £100 without permission. That compares with up to £37 for borrowing £100 for a month with some payday lenders.
FCA research found many people don’t realise how much overdrafts can cost. Others do not see an overdraft as borrowing and quickly become accustomed to having one. A previous study by the Office of Fair Trading suggested 10% of current account customers are permanently or usually overdrawn.
The FCA said banks may be tempted to raise overdraft limits to make money from interest and charges.
Christopher Woolard, from the FCA, said: “With overdrafts bolted on to more than 30 million current accounts, we want to make sure it is working well for consumers.”
Moneyfacts said: “There is a mix of percentage charges and fees, making it impossible to compare one account with another. This is not a new problem; it is a problem that has only just come to the fore.”
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