Authorised overdrafts could be targeted by banks to boost profits

“Customers need to review authorised overdraft costs,” say Moneynet.co.uk

By Elliot Wright, 24th June 2010

With Lloyds TSB reducing its bank charges for unauthorised borrowing, the bank has somewhat unceremoniously shifted its money-making gaze on its more careful current account holders.

From 2 December, customers using an authorised overdraft will be charged a monthly fee of £5 on top of the usual 19.3% interest they pay on the balance.

This means an authorised overdraft balance of £500 for a full month will cost customers £13.04, up from £8.04 before the changes, making Lloyds TSB's overdraft one of the most expensive out of all the High Street banks.

With other banks potentially following suit, account holders who use overdrafts regularly will have to be careful with whom they choose to bank with.

The cheapest option for long term borrowers is the Alliance & Leicester current account, which charges 50p per day with a maximum of £5 a month for those who are overdrawn by £500 for the entire month.

The dearest option is Halifax's current account, which charges £25 under the same conditions.

"The last thing consumers need is to be hit with additional costs for managing their money and keeping within an agreed borrowing facility," said Andrew Hagger of financial comparison site Moneynet.co.uk.

"Whereas at one stage unauthorised overdrafts only incurred daily interest charges, the introduction of daily overdraft fees from Halifax last December and the £5 monthly fees from Lloyds from this December means that customers need to ensure that their bank account is the most cost effective for the way they manage their money over the month," he added.

Authorised borrowing examples

Source: Moneynet.co.uk

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