Our latest research has revealed that charges for unarranged overdrafts can cost up to £156 more than a payday loan charge.
We took a look at the cost of borrowing £100 over 30 days, and found that the charges applied for unarranged overdrafts could be up to 7.5 times higher than the maximum charge of £24 for a payday loan.
As part of the Competition and Markets Authority’s (CMA) inquiry into the banking sector, it found that over half of overdraft users had used an unarranged overdraft at some point.
Far too many people are being stung by these unarranged overdraft fees too - we heard of one case where someone who slipped into the red by 11p and was hit by a £15 charge, and another who was charged £90 for being overdrawn by £2.
And while some of the most vulnerable banking customers are being caught out by these unarranged overdraft fees, banks are taking in around £1.2bn in revenue from these charges.
Our advice to anyone who thinks they could end up overdrawn, is to speak to their bank and arrange an overdraft.
But with over 66,000 people demanding for better banks, we think it’s high time that banks ensure that they’re treating all their customers fairly.
Our Director of Campaigns and Communications, Vickie Sheriff, said:
‘It’s not right that people with a financial shortfall can be charged so much more by the big high street banks than they would by a payday loan company – especially if the money is borrowed over two monthly charging periods. If banks can continue to set their own charges, then consumers will continue to be hit by exorbitant fees.’
‘The Financial Conduct Authority must use its current review to cap these high charges and ensure consumers cannot be charged more for unarranged overdrafts than arranged overdrafts.’
Also joining our call for action today is Rachel Reeves MP. She was in Parliament calling on the Government to act on exorbitant unarranged overdraft fees. You can read more what Rachel and Which? are doing to highlight this over on Which? Conversation.
If you agree that more must be done to crackdown on these exorbitant fees then please sign our petition to demand better banks!
Two of the big banks have come out in support of our Better Banks campaign, which calls on the industry to deliver better everyday banking for their customers.