uSwitch.com: Lloyds TSB to increase authorised overdraft rates

Lloyds TSB’s announcement to increase authorised overdraft rates for the third time in just nine months will generate an additional revenue of £24 million in a year.

Mike Naylor, Personal Finance Expert at price comparison and switching service uSwitch.com comments: “Lloyds TSB’s decision to increase authorised overdraft rates by up to 3.1% in just nine months from an average of 14.8% EAR to 16.1% EAR is terrible news for the bank’s 8.1 million current account customers. Lloyds TSB currently holds around a quarter of the UK's current account market, which means that these three increases will result in the bank generating an extra £24 million in the next year, with 2.72 million of their customers regularly being overdrawn. Over the same period Lloyds has increased its credit interest rates on these current accounts by an average of just 0.12%.

“With the impending OFT investigation into current account penalty charges, banks continue to squeeze every last penny out of consumers in anticipation of the revenue they could lose when the investigation finally comes to fruition. We expect to see other banks following suit.

“Customers of Lloyds TSB should consider switching away to a provider that charges lower overdraft rates, such as Alliance & Leicester’s Premier Direct current account, which offers a 0% 12 month introductory rate, which reverts to a 5.9% typical EAR. A customer switching to this account with the average overdraft of £677 would save £109.06 in the first year.”