Current accounts stung by overdraft rates hike
Millions of current account holders have been stung by a hike to overdraft rates this week, with both Nationwide and Barclays increasing overdraft charges.
Nationwide, Britain’s biggest building society, has increased interest charged on overdrafts for the third time in a year, with overdrawn customers paying nearly double compared to 12 months ago.
Barclays, meanwhile, has put the overdraft rate on its Additions Active account up to 12.9% from 9.6%, an increase of nearly a third.
Other Barclays account holders have also seen interest rates rise on their overdrafts.
Analysts blamed the rise in overdraft rates, which come at a time when the Bank of England’s base rate is at an all time low of 0.5%, on banks and building societies attempting to recoup profits lost during the credit crunch.
“Banks and building societies will be facing pressure on profit margins due to increased levels of bad debt and it’s highly likely that other providers will increase borrowing rates before the summer is out,” said Andrew Haggar of Moneynet.
“Nationwide customers will feel particularly hard done by as they have seen their authorised overdraft rate rise from 9.9 per cent in June 2008 to 18.9 per cent now,” Haggar added.
Kevin Mountford of moneysupermarket.com expressed frustration at the rate rises.
“The moves by Nationwide and Barclays are disappointing,” Mountford said.
“Whilst base rate remains static banks really have no excuse to hike prices,” he added.
He added that other financial providers are likely to follow the lead of Barclays and Nationwide.
“There is little doubt these moves will kick-start a series of rate reviews by others, meaning struggling bank customers are going to be stung with a steep rise in the cost of going into the red,” Mountford said.
Nationwide claimed its rise in rates was to ensure the company continues to run a “prudent and sustainable business”.
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