Steady increases in overdraft rates are scandalous yet they slip quietly under the radar

Have you checked your overdraft interest rate lately? If not, you may be in for a shock. You may be paying up to 17.7% APR – or even as much as 27% if you go above the authorised limit.

So if you were hoping to dip into an overdraft to fund your Christmas shopping spree, think again. In many cases it is one of the worst finance options around.

As if the sky-high interest rates aren’t enough, you’re also paying through the nose just to have an overdraft facility. Set up and annual renewal costs up to €30 each.

And guess who is on top of the pile with the highest overdraft rates? The bank that’s firmly ruled out any mortgage cuts for borrowers, that’s who.

Permanent TSB has the dearest overdraft rate (based on APR) at a whopping 17.7%.

A survey by the National Consumer Agency compares nominal rates rather than APRs. This doesn’t take into account set-up and other charges. But on this basis, PTSB’s nominal rate is still high at 15%.

Ulster Bank charges a bit more at 15.55% (nominal) but it would be unfair to regard it as the dearest. That’s because it humanely allows existing UFirst account holders, at least, to go €500 into the red without incurring any interest.

KBC charges 13.5% and Bank of Ireland comes in at 13.25%. However, BoI also has the dearest annual/set up charge of the lot at €30.

So its APR (which takes this into account) would therefore be a lot higher.

And last but not least, with the cheapest overdraft rates, is AIB – the only bank that has reduced its mortgage rates. So what has happened to competition?

It’s hardly neck and neck with a pretty big spread of nearly 7% APR between the dearest and cheapest overdrafts.

Permanent TSB used to blow its own trumpet about free banking yet now refuses to reduce its mortgage rates and charges through the nose for overdrafts.

BoI used to rival AIB with competitive rates on all its products. It was something of a duopoly at times but at least the Big Two competed with one another.

Now BoI doesn’t bother following AIB’s mortgage cut and does not compete on overdraft rates either.

To add insult to injury, overdraft rates have been rising steadily, and sneakily, even as general rates have plummeted. Check out our Best Buys section below. Demand deposit rates this week slumped to below 2% for the first time in years.

Meanwhile, interest rates have also plunged on the inter-bank market, where banks borrow money. And the European Central Bank’s prime rate for lending to banks is barely above zero.

There has been a furore because mortgage rates – apart from AIB’s - have not come down as a result. At least they have not gone up.

The latest Central Bank figures show the average overdraft rate in August last year was 13.57%, which was pretty high. A year later, this had crept up to 14.3%. That’s 22 times what banks pay for deposits. And there has been hardly a peep of protest.

Are we so financially battered that one more blow doesn’t seem to matter much? Banks will excuse having to fleece customers in all sorts of ways to rebuild their battered balance sheets. Yet doesn’t AIB, with the cheapest mortgage, credit card and overdraft rates, still make a profit?