Money Box – a Radio 4 programme has revealed that on average a customer who goes just £100 above their overdraft limit for 28 days would actually repay £200 – equating to an annualised percentage rate of 819,100%.
According to Eric Leenders of the British Banking Association, though the industry is set to look into the concerns regarding the high rates, he feels that using APRS to calculate unauthorised borrowing does not present an accurate figure because the fees are representative of borrowing on an overdraft facility as opposed to a particular sum of money.
The high fees from banks have been compared to payday lenders – services which offer a lump sum of money very quickly but which come with very high rates of interest.
However, even so an analysis of banks and payday lenders found that none of the latter charged more than 5,000% whereas two banks – Santander and Lloyds TSB – charged the equivalent of more than 300,000%
Experts recommend that consumers try to avoid using an unplanned overdraft or a pay day loan facility and instead either arrange an overdraft or put the purchase on a credit card to be paid off as soon as next payday arrives.
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