Overdraft charges soar to record 19%: Borrowers pay an extortionate 38 times the Bank of England's base rate

By Becky Barrow
Last updated at 3:35 AM on 7th December 2010

Hefty: Lloyds bank, which was bailed out by the taxpayer two years ago, is charging customers 19.3 per cent for going overdrawn - plus £5 a month for the privilege of having the facility

Bank customers are being crippled by the highest overdraft charges since records began, figures have revealed.

Experts last night condemned the ‘exorbitant’ interest rates forced on those who plunge into the red.

Rates for authorised overdrafts – which have been agreed in advance – reached a record of 19.09 per cent in October, according to the Bank of England.

It means the typical customer who goes overdrawn is paying a rate 38 times higher than the base rate of 0.5 per cent.

If you were overdrawn by £1,000 for a year, the cost would be nearly £200, before any other charges or fees are taken into account.

Lloyds, which was bailed out by the taxpayer two years ago, charges 19.3 per cent - with customers required to pay £5 a month on top for the privilege of having an overdraft facility.

Last night Andrew Hagger, of financial information website Moneynet, said: ‘When an overdraft is unauthorised, you can understand the idea that you are charged when you go further into the red.

‘But to ask to borrow money and then be charged these exorbitant rates is just very difficult to swallow.’

He said the record authorised overdraft rates are particularly galling when compared to the average interest rate paid to those whose current accounts are not overdrawn.

An average customer in credit is paid interest at an insulting 0.19 per cent. If you were to have a £1,000 in your account for a year, a basic rate taxpayer would get interest worth a paltry £1.50 after tax.