Interest charges on authorised overdrafts have climbed by an average 1.35 per cent since June this year as banks put the squeeze on borrowers, new analysis from MoneyExpert.com shows.
The average authorised overdraft now charges 13.06 per cent compared with 11.71 per cent in June this year despite the Bank of England cutting base rates by 0.5 per cent with the promise of more to come, the independent financial comparison website says.
While the charges for borrowers have increased the rates paid to customers in the black have been trimmed from 1.98 per cent in June to 1.85 per cent now. And the number of current accounts paying less than one per cent in gross interest has increased from 70 in June to 89 now.
The only glimmer of hope for borrowers is that the interest rate charged for going into the red without permission has fallen from 20.93 per cent in June to 19.85 per cent now.
However MoneyExpert.com believes the rise in authorised borrowing charges is an indication of the shape of things to come for borrowers as banks position themselves for a possible court ruling against penalty fees following the long-running Office of Fair Trading case against the banks.
Sean Gardner, Director, MoneyExpert.com, said: "While attention has been focused on whether or not banks will survive in the current financial crisis they've been quietly raising rates for borrowers and reducing them for customers in credit.
"The Bank of England may have cut rates with the likelihood of bigger cuts to come but customers using their agreed overdrafts are not feeling any benefit.
"The banks are understandably concerned about the risk of bad debts and are tightening up lending rules. For customers with debts the message is clear. They need to work to reduce debts or ensure that they get the best possible rate for their borrowings and then work to reduce debt.
"Customers with good credit records can still access good deals but many more will struggle."
Top credit card deals available currently include a 16 month zero per cent introductory rate for balance transfers at Virgin Money. The credit card market currently offers 182 products with 0% introductory balance transfer deals with periods varying from three to 15 months. Other deals, from the likes of First Direct, offer considerably longer introductory periods but with rates around 6%.
MoneyExpert.com is advising consumers to consider all elements of a credit card before switching. For those with large balances a reduced transfer fee may be most appropriate, but it is also important to consider the period for which the introductory rate lasts and the rate that will be applied when that period expires.
MoneyExpert.com offers a unique service which enables people to find the financial products which best meet their specific needs, and which they are more likely to be successful in being accepted for. It includes exclusive research conducted by MORI, which reveals providers' service levels. This information is married up with a financial database which lists the products suited to the customer. For the first time, people can review a product's price, features and also the level of service offered by the provider to enable them to make a more informed choice.
