How banks cash in on their charges victory
Banks recently won a victory in court over the amount they can charge for unauthorised overdrafts. Now some of them are taking full advantage.
For the past two years, whenever I've written articles about current accounts I've ended up recommending the Alliance & Leicester Premier Current Account.
At first glance it's a very attractive offer and for many people it's still the account to go for. You get a 0.5% in-credit interest rate that might sound low but it's better than a lot of other current accounts and an interest-free overdraft for the first year.
I used to heartily recommend the account for anyone who regularly goes overdrawn. That was because, for the first year, you get an overdraft of up to £2,000 interest-free. After that you will be charged 50p a day, capped at £5 a month.
And the best part was that if you accidently went over your overdraft limit you would only be charged £5 a day instead of the large one-off charge many other banks levy. This meant it was a great option for anyone who might slip over the limit a bit for a day or two at the end of the month.
Unfortunately, that is no longer the case. After the banks won the court case over unauthorised overdraft charges, it was inevitable that some of them would make the most of the win. Alliance & Leicester certainly have. They've recently introduced a new charge. Now if you go beyond your overdraft limit, you'll pay a £25 'payment review fee' each time and pay £5 a day until you get back within your overdraft limit.
That makes the account one of the worst offenders for unauthorised overdraft charges.
If you want to know which bank account you should be going for now, I'll be writing about some better current account options in this week's MoneyWeek magazine (if you're not already a subscriber, subscribe to MoneyWeek magazine).