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Credit crunch consequences affecting current account holders
13/05/2008 17:06:00
Banks are increasing interest rates on current account overdrafts to compensate for the loss of funding from excessive credit card default fees, a financial expert has said.
With consumers already struggling with increasing costs on mortgages, utility bills and higher taxes, the focus is now on current accounts.
Since the ruling by the Office of Fair Trading that certain credit card default charges were "unfair", obliging banks to cut any fees exceeding £12, certain banks and building societies began to increase their overdraft rates to make up for the lost revenue.
Michelle Slade, an analyst for Moneyfacts, said: "A lot of the biggest moves have been by the major high street lenders, meaning a large proportion of the population are going to be hit at a time when they can least afford it."
Nationwide have recently put their overdraft interest rates up by three per cent to 12.45 per cent, effective from June 1st 2008.
This followed the move by the Royal Bank of Scotland on April 28th, which saw an average increase of 2.44 per cent across interest rates on three of its current accounts, shown in statistics gathered by Moneyfacts.
In addition to this growing pressure on personal finances, the consumer price index inflation rate has climbed to three per cent, largely due to rising prices in oil leading to increases in household costs.
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