Not even a maths PhD student can fathom the complexities of bank overdraft charges, according to one consumer expert.
According to consumer body Which?, current account holders could be hit with fees as high as £150 for going into the red without any clear explanation as to the charges. Ministers need to make banks provide easily understood and honest information concerning the true costs of overdrafts, Which? said.
Personal and business bank account providers currently use a perplexing mix of monthly and daily fees in combination with further charges linked to the number of bounced payments and cheques. Each provider has its own scheme when it comes to these charges, meaning that banking consumers find it hard to compare any two given current accounts in order to find the one with less fees.
Which? conducted its own research to see if unauthorised overdraft costs could be worked out by a panel of 12 people, one of which was a maths PhD student. Out of the 48 mock bank statements given to the group, only seven of the statements could be deciphered correctly.
Charges for unauthorised overdrafts varied wildly from bank to bank, with fees as small as £10 to as much as £50 on a small overdraft. Medium overdrafts saw this jump to a range of anywhere between £44 to £125, and large overdraft fees went even higher to £66 to £150, according to the consumer body’s research.
However, Which? found that each provider also assigned additional charges and fees to their current accounts on top of their advertised ‘simple’ daily interest or fees on their products.