Overdraft interest rates set to rise
Interest rates on overdrafts are set to increase - despite the Bank of England holding interest rates.
Since February last year average overdraft rates has risen by 1.54 percentage points.
This week Nationwide increased rates on its authorised and unauthorised overdraft rate will rise from 17.90 per cent to 18.90 per cent EAR on the FlexAccount current account.
The building society's authorised overdraft rate has now risen from 9.9 per cent to 12.9 per cent in June 2008, then to 17.9 per cent in February 2009, and now still higher.
Last week Barclays increased the rates on its overdrafts after the 12 month introductory offer from 17.9 per cent to 19.3 per cent.
Kevin Mountford, head of banking at moneysupermarket.com, said: "The moves by Nationwide and Barclays are disappointing - whilst base rate remains static banks really have no excuse to hike prices.
"There is little doubt these moves will kick-start a series of rate reviews by others, meaning struggling bank customers are going to be stung with a steep rise in the cost of going into the red."
Of the best authorised overdraft rates on the market, according to data from Moneyfacts, Alliance & Leicester leads the way with a zero per cent deal for the first 12 months. After that there is a 50p daily usage fee - up to £5 a month.
Norwich & Peterborough offers an authorised overdraft rate of 9.74 per cent on its Gold account, while Cahoot offers 11.8 per cent.
The Co-operative Bank has authorised and unauthorised rates of 15.9 per cent.
Current Account Activity - Feb 08 to June 09
| Provider/Account | Overdraft Rate (EAR) 01/02/08 | Overdraft Rate (EAR) 05/12/08 | Overdraft Rate (EAR) 01/06/09 |
|---|---|---|---|
| Nationwide | |||
| FlexAccount | 9.90% | 12.90% | 18.90% |
| Barclays | |||
| Bank Account | 0%* - 15.6% therafter | 0%* - 17.9% thereafter | 0%*- 17.9% thereafter (19.3% from 08.06.09) |
| Abbey | |||
| Preferred Overdraft Rate | 0%* - 12.9% thereafter | 0%* - 12.9% thereafter | 0%* - 12.9% thereafter |
| Alliance & Leicester | |||
| Premier Direct Current Account | 0%* - Fee based thereafter | 0%* - Fee based thereafter | 0%* - -Fee based thereafter |
| Lloyds TSB | |||
| Classic Plus Account | 18.90% | 18.90% | 18.90% |
| HSBC | |||
| Current Account | 18.80% | 19.90% | 19.90% |
| NatWest | |||
| Current Plus Account | 19.99% (Typical EAR) (0% - up to £100) | 19.24% (Typical EAR) (0% - up to £100) | 19.24% (Typical EAR) (0% - up to £100) |
| first direct | |||
| 1st Account | 12.9% (0% - up to £250) | 15.9% (0% - up to £250) | 15.9% (0% - up to £250) |
| Average | 10.06% | 10.85% | 11.60% |
*Introductory In-Credit and Overdraft offers for the first 12 months
(Source: www.moneysupermarket.com 02/06/2009)
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- overdrafts
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