Average current account overdraft rate at decade high

Despite bank base rate being at an all time low, authorised overdraft rates have hit their highest level in a decade.

The average authorised overdraft rate now stands at 14.22%. The last time overdraft rates were this high, bank base rate was 6.00%.

Michelle Slade, spokesperson for Moneyfacts.co.uk commented: "Despite eventually winning the OFT case, banks made significant changes to the level of charges they will levy for unauthorised borrowing.

"Changes made to reduced unauthorised borrowing charges meant banks lost a significant revenue stream, something they can ill afford in the current climate.

"As one revenue stream closed inevitably they have moved to find another.

"The loss of income gained from a minority of customers is now being recouped from all customers who use an agreed overdraft.

"Banks are likely to be making more now from these increases than they ever were from penalty charges.

"Customers remain reluctant to switch current accounts, but it's a decision that could leave them out of pocket, as the biggest current account providers in the UK have some of the highest rates on the market.

"Having an account paying a competitive rate of credit interest is not much use if you spend most of the month in your overdraft.

"Switching to an account with a competitive overdraft deal could save you hundreds of pounds.”