Worst banks for overdrafts

With banks appearing to have thrown the next punch when it comes to punitive overdraft charges it seems there's no escape from the furore.

And until the Office of Fair Trading steps in and sets new recommended charging levels or structures there's no escaping penalty fees for breaching authorised overdraft limits either.

And new figures show some providers' punishments are much fiercer than others.

Research of seven major banks and building societies by moneysupermarket.com shows a drastic difference between the most lenient and harshest penalty charges (the banks were: HSBC, Nationwide BS, Barclays, Lloyds TSB, Halifax, Alliance & Leicester and NatWest).

Who's the most expensive?

Indeed, the cost of going £60 over an authorised overdraft limit with three £20 guaranteed cheques in a month varies by £108.

An HSBC customer would face a charge of £25, while the cost to those banking with NatWest would be £133 - a staggering 432 per cent more than HSBC, and more than double the unauthorised amount borrowed.

The research arises at a time when the furore surrounding bank charges has hit new levels, with campaigners accusing banks of blackmailing customers to deter them from reclaiming penalties.

The OFT is already investigating unfair bank charges, and moneysupermarket.com's findings demonstrate just one of the reasons immediate action is required, especially in the name of Treating Customers Fairly.

Kevin Mountford, head of savings at price comparison website moneysupermarket.com, said: "Rather than waiting for the OFT to act, I would challenge the banks and building societies to revisit their unauthorised overdraft charging structure. As our research shows, there is clear inconsistency which presents an opportunity that HSBC seems to have seized."

The message though is clear - be wary of breaching your authorised overdraft or face a nasty shock.

People should get smart and take steps to avoid falling foul of their agreed overdraft by planning better where possible.

If they are sure they will exceed their agreed limit they should call their bank and ask for a temporary extension.

Alternatively, they could try and secure a 0 per cent on purchases credit card to cover any unexpected expenditure.

Here's a list of the highest charging banks for overdrafts (figures correct as at 12.06.2007 - provided by moneysupermarket.com and based on penalty charges for going £60 over an authorised overdraft limit with three £20 guaranteed cheques in a month):

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• 0% interest credit cards