Bank customers unable to calculate overdraft fees, Which? research finds

Call to force banks to make it easier to compare overdraft fees and other current account charges

Bank customers have no idea how to calculate overdraft charges, according to research by consumer body Which?. It is now calling on the government to force banks to make it easier to compare current account fees.

Which? asked a group of bank customers to work out the total cost of using an unauthorised overdraft at each of the 12 biggest banks. Despite being given access to all the banks' websites, few of those tested could correctly calculate the true cost of going overdrawn once interest and other fixed charges were added to any daily fees or penalties for unpaid transactions.

Across the group of customers tested, just 10 of the 72 calculations were made correctly. A principal inspector of taxes was right on only one of four calculations, while a retired headteacher got all his answers wrong. Only six of the 18 volunteers thought that a typical consumer would be able to compare the charges.

Which? executive director Richard Lloyd said true charging transparency would encourage more people to switch accounts.

"Consumers are faced with a myriad of complicated charges for using an unauthorised overdraft, and it's virtually impossible for people to calculate and compare the cost of running a current account. To boost competition we want the government to make banks release data about how customers use their accounts so it's easier for them to work out charges and rank providers by cost."

Which? says this data could be used to develop comparison tools that would allow consumers to rank providers according to their financial situation.

British Bankers' Association's director Eric Leenders played down the Which? findings, saying the banks already help customers to compare account charges.

"All the major banks also make information about customers' current account use available to them in a downloadable format as required by the government's initiative to encourage transparency."

He said overdraft charges have plummeted since 2008, with estimated consumer savings of up to £928m over the past five years.

Earlier this week it emerged that more than 300,000 people switched current accounts in the final three months of 2013, up 17% on a year earlier.

The Payments Council, the body responsible for payment services which published the numbers, said it marked an "encouraging start" for its seven-day account switching service, which was launched in September. However, Which? has reported that two-thirds of people who moved accounts had problems, while more than a quarter said it took eight working days or more.

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