press release

“The OFT’s research does not really tell us anything we didn’t know already in that it is those that fall foul of the providers’ complex and punitive charging structures that end up providing free banking for the masses,” says Hagger of price comparison site Moneynet.co.uk.

“There should be a clear, simple and widely publicised tariff to enable consumers to manage their money without being hammered hard for minor indiscretions.

“The consumer has a part to play too of course. It is essential that you keep close tabs on your balance and this option is available via many channels ie, in branch, via telephone, from the ATM network or online,” he said.

“If and when the decision is made to cap the current unauthorised overdraft fees and unpaid charges it is inevitable that we will move towards paying monthly or annual fees for our personal banking.

“It’s not surprising that lenders make 81% of their income from such charges - a look at the tables below illustrate how quickly charges can stack up.

“Take the example of an item for £50 being presented to your account. If your bank agrees to honour this payment and you are unable to bring your account back into the black or within your agreed limit for two weeks, these are the charges you could be hit with.”

And this is how the charges would stack up for a £200 unauthorised overdraft for five days.

“These bills could get much larger if you remain outside your limit for longer and if more items are presented and either paid or returned,” says Hagger.

“This could really set your finances back during what are some of the most testing economic circumstances seen for years.”

Overdraft Tips from Moneynet.co.uk

• If you are sailing close to the wind with your overdraft limit, don’t ignore the situation otherwise things will only deteriorate further. Get down to your bank or give them a call – it’s got to be better than being hit with additional fees and interest that you can ill afford
• If you have already been charged banking fees, and it’s a one off, then try asking for a refund; it’s always worth a try
• For even the most financially disciplined, sometimes an unexpected expense may cause them to slip into the red or go over an agreed limit. To avoid being stung in such circumstances, it’s worth setting up an ‘in case of need’ limit, which will give extra flexibility and peace of mind
• Finally, remember that overdrafts are designed to manage short term cash flow problems, not to fund day to day living and be a permanent feature of your account. If you find yourself constantly overdrawn, it’s time to take a long hard look at your budget and to consider moving your borrowing to a personal loan