Debt Advice Help and Support

New research shows a staggering one in ten bank customers are living on their overdraft, with 5 million UK bank accounts persistently in the red.

The reality of the situation is far worse for some customers, given the inconsistent cost of being in your overdraft for different banks. The variation in cost can be quite extreme, with some banks charging up to five times more than others for using the overdraft facility.

Comparison website Moneysupermarket.com commissioned the research, and discovered that a £500 overdraft with an Alliance & Leicester Premier Direct current account for one year would cost £60, but the Halifax equivalent (Halifax Reward Account) would charge £300, a 500% increase.

Further findings of the research highlighted nearly two out of five of bank customers use their overdraft once a year, with more than 10% using the facility more than five times.

For regularly overdrawn customers, choosing a bank with a fee capping function, or an account which charges an annual percentage rate, would prove most beneficial.  Several high street banks and building societies do not cap their overdraft fees and could charge their customers a large sum in the longer term. It pays to research into the overdraft fine print when shopping around for a bank account and find banks that operate a fee capping service on a monthly basis.

Worse still, the cost of borrowing plunges further for those consumers that fall into an unauthorised overdraft. Many banks also impose a fee depending on the amount and length of time you are overdrawn.  This could spell disaster for individuals looking to manage their debt.

Only months after banks were given the green light in the overdraft charges ruling, Barclays increased the overdraft interest rate by 5% on seven of their accounts on offer. While it is unsure yet if other banks will follow suit, consumers that are struggling with making payments on their debts may be advised to seek professional debt advice to deal with such problems.