20th October 2014
The equivalent of 13.7m Britons with a current or basic bank account have been charged for entering an unauthorised overdraft in the past three months.
Authorised overdrafts are designed as a form of short-term lending to act as a safety net when there is not enough money in a person’s account to cover a card payment or cash withdrawal, Direct Debit or standing order.
However, some people are exceeding their authorised overdraft, or do not have one, and as a result are being hit with charges for going into an unauthorised overdraft. New research conducted for budgeting account provider thinkmoney.co.uk found that more than a fifth, at 22%, of current account and basic bank account holding respondents have received unauthorised overdraft charges since July.
Of those who have been charged for using an unauthorised overdraft, over half, at 58% have paid sums of £20 or less but more than one in 10, or 11% admitted they had paid over £50 in charges during the period.
Bank charges like these can be particularly troublesome when they are levied on someone who is already struggling financially, as one set of charges can sometimes lead to them being charged again the following month. Previous research conducted for thinkmoney in January revealed that more than a quarter of respondents had paid bank charges during the previous year.
Of these, more than half, at 56% said that they had been pushed into an unauthorised overdraft at least once as a result. This may have led to further charges, which could make it difficult for customers to get back in control of their finances.
Those aged between 25 and 34 years old, who are at an age when they may be more inclined to consider setting up home, getting married or starting a family, were the most likely to have been charged for unauthorised overdraft usage in the last three months. More than a third, or 39% of this age group said they had been charged for doing so.
Ian Williams, spokesman for thinkmoney, says: “For many people ‘free banking’ isn’t free, as they are paying substantial overdraft charges. Although the thinkmoney Personal Account carries a monthly fee, many of our customers tell us that it saves them money because not only are they avoiding overdraft charges but our built-in budgeting service means that their bills are being paid on time and they aren’t incurring further penalties for late payment.”