Overdraft fees charged by banks have reached their highest ever levels.
Bank customers are being charged a huge rate of interest for using their overdraft facilities.
Bank overdraft charges have hit a record high, according to figures revealed by the Bank of England.
The average authorised overdraft rate was 19.09% this October, which means that customers were being charged 38 times more than the 0.5% base rate – a consumer overdrawn by £1000 would have had to pay back an extra £200.
Andrew Hagger, of financial information website Moneynet said: “When an overdraft is unauthorised, you can understand the idea that you are charged when you go further into the red. But to ask to borrow money and then be charged these exorbitant rates is just very difficult to swallow”.
Lloyds was found to charge it’s overdrawn customers a rate of 19.3% in addition to a monthly £5 fee for having an overdraft facility in place. Two years ago the bank was bailed out by the taxpayer during the height of the UK recession, which has led to some public figures describing the charges as outrageous and unfair.
A Member of the Treasury Select Committee, Labour MP Chuka Umunna, said: “These charges are outrageous when the people they are imposing them on are the ones having to pay for the mess the banking sector created”.
Mr Hagger said the high charges are especially galling when compared to the 0.19% average interest rates paid out to consumers who do not go into their overdraft. This means that a customer who has £1,000 in their account for a year would only reap an interest of £1.50 after tax.