Overdraft usage 'on the increase despite rise in rates'

29/07/2008

Many more Britons are using their overdraft facilities - despite rates being at decade-long highs.

According to figures from the Bank of England, the average rate charged for going into the red in a bank account continues to climb - rising from 17.4 per cent to 17.9 per cent in June.

Despite this, the UK's collective personal loan and overdraft debt is also rising, and has grown from £161 billion to £177 billion over the past year.

The credit crunch and rising food and fuel prices have been widely blamed by analysts for consumers' tightening budgets.

Now, however, the risk is that more and more people will become locked into debt spirals by using high-interest products to tide themselves over.

Moreover, David Black at stats firm Defaqto told the Daily Telegraph, some bank account providers are worsening the situation through their own terminology in publicity material.

"One of the main difficulties when choosing a current account is to assess the probable charges for those who are likely to be overdrawn occasionally or those who are semi-permanently in the red," he said.

"During the past nine months or so we've seen…a change of terminology, with the overdraft prefixes 'authorised' and 'unauthorised' being replaced by 'advance' and 'instant', 'formal' and 'informal', 'planned' and 'unplanned'."

Tags; Current UK Economy,

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