Outcry over £3bn overdraft bonanza

Banks are charging customers £3 billion a year for going over their authorised overdraft limits, it is revealed today.

Research lays bare the huge profits being made from charges in the small print.

One bank, NatWest, slaps a punishing 33.78 per cent interest rate on those who go into the red without permission.

The high charges triggered an outcry today, with claims that consumers are being unfairly penalised for making genuine mistakes.

Consumer magazine Which?, which published the research, labelled the fees "way out of proportion". It claims they have become a "huge money spinner" for high street banks.

Politicians joined the attack, calling for an immediate investigation by the Office of Fair Trading.

The Which? research suggests that around a quarter of people have exceeded their agreed overdraft limit within the last 12 months, with around two thirds of these customers admitting they did so more than once.

The report says that the high proportion of people who go over their limit suggests it is not simply a case of customers handling their money badly but consumers also being penalised for making genuine mistakes.

Which? found that three out of five current account customers have no idea what they will be charged if they go over their agreed limit.

It argues that a combination of punishing interest rates and additional charges are allowing banks to rack up huge profits from overdrafts.

Malcolm Coles, editor of Which?, said: "Unauthorised overdrafts are a gold mine for banks."

A NatWest spokesman said most customers were not charged the amount Which? claimed.