Overdraft interest rates rise 7.31%

Wednesday, 19 November 2008 04:01

Interest rates on current accounts have risen in some cases by 7.31 per cent, despite the Bank of England dropping the base rate by 2.75 per cent over the last year.

Data from Moneyfacts.co.uk show over the last year both Yorkshire Bank and Clydesdale Bank - both part of the National Australia Bank Group - have increased its interest rates on Current Account Plus overdrafts from 9.64 per cent to 16.95 per cent.

Meanwhile interest earned on their current accounts has remained unchanged at 0.1 per cent.

Smile has increased its overdraft interest rate by four per cent to 15.90 per cent.

Nationwide, First Direct and Abbey have all upped their rates by three per cent on some of their accounts.

However, not all rates are going up.

The Co-operative Bank dropped its current account interest rates by 3.66 per cent to 15.90 per cent.

NatWest's Current Account Plus dropped 0.17 per cent.

Lloyds TSB, Intelligent Finances, Halifax, Coventry Building society and Alliance & Leicester all saw no changes on some of their accounts.

Michelle Slade, analyst at Moneyfacts.co.uk, said: "Customers who maintain a credit balance will be pleased that they have not had the full impact of the cut passed on to them.

"However, with increasing costs, it is likely more people than ever going overdrawn."

She added: "Many people are finding that every penny counts, so it has never been as important to make sure you get the best current account to suit your needs."

She advised those who are regularly in the red to opt for Alliance & Leicester's account that charges 0%, with no charges for the first 12 months. After 12 months the account costs 50p per day, to a maximum of £5 per month.

"If you maintain a credit balance, choose an account paying a good rate of interest. Alliance & Leicester currently pays 8.19 per cent on balances up to £2.5K. However, this is an introductory deal for 12 months," Ms Slade said.

"After this time the rate reverts to base rate less one per cent, which may not be so competitive in this period of low interest rates.

"Halifax pays five per cent credit interest on its High Interest Current Account on balances up to £2.5K and unlike the Alliance & Leicester account, it is not an introductory rate."

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