Cashpoint

High street bank customers are paying £640million a year more than they need to in fees and interest on overdrafts, research reveals.

Some big banks charge over 50 times more than the cheapest provider for going into the red.

On average, overdraft users are £285 in the red each month for nine days, paying £56.52 every year to their bank in fees and interest.

That’s compared to customers with First Direct, which charges no interest or fees on overdrafts up to £250 – so a £285 overdraft will cost just £1.56 a year.

The amounts being charged by banks vary widely.

It costs £87.36 to be £285 overdrawn with Natwest/RBS, £85.44 with TSB, and £81 with Santander and Barclays, while with HSBC it’s £15.48 and Nationwide charges £14.76.

According to uSwitch.com, 20% of people have no idea what their overdraft costs them and 60% didn’t know they could switch bank account while being overdrawn.

If you rely on an overdraft, it’s important you check and compare the costs – and if you find an account with cheaper charges, switch. Don’t end up paying way over the odds.

Tashema Jackson, money expert at uSwitch.com, said: “Overdrafts are an absolute essential part of consumers’ everyday finances, but the associated charges seem to be accepted as a necessary cost when they do not need to be at all.”