Banks push overdraft fees up to ten-year high

THE average cost of an authorised current account overdraft has reached the highest level in a decade, despite the record low Bank of England base rate.

Authorised overdraft rates now average 14.2 per cent, according to financial information service Moneyfacts, up from 13.6 per cent a year ago and compared with a base rate since March 2009 of 0.5 per cent.

The last time authorised overdraft costs were this high the Bank of England base rate was 6 per cent.

Overdraft costs are rising at a time when banks are reining in their charge for unauthorised borrowing, despite their victory over the Office of Fair Trading in a court case concerning the legality of overdraft charges.

Michelle Slade, spokeswoman for Moneyfacts, said: "Changes made to reduce unauthorised borrowing charges meant banks lost a significant revenue stream, something they can ill-afford in the current climate. As one revenue stream closed, inevitably they have moved to find another."

Other borrowing costs have also risen, despite the record low base rate. The average credit card rate is at a 12-year high of 18.8 per cent, according to Moneyfacts. The average cost of an unsecured loan is 12.9 per cent, up from 8.8 per cent in 2007, said Defaqto.