Datamonitor, independent market analyst, releases the report concerning recent increased interest rates and its influence on customers using authorised overdraft facilities.
The current economic turmoil and rising prices obligates consumers to rein in their spending. With banks offering less favourable deals on loans and credit cards, some may have contemplated their overdraft as a source of funding, but the costs will be more expensive than expected. With newly-tightened borrowing criteria on the credit market consumers face more expensive credit across the board which becomes a shock to many after years of easy access to funds.
According to the resolution of High Court to give OFT the right to investigate bank overdraft fees and charges the terms and conditions of the borrowing may be revised and in case of considering them unfair, the high street banks will be forced to reduce the fees and charges levied against those using their overdraft facility.
This could see the end of free banking and the introduction of a monthly fee-paying model. A charge per transaction for standard banking services could be one of the answers, as the banks will need to find other ways to reclaim the estimated 2.6 billion they receive from overdraft fees and charges. In the current difficult market this is revenue that the banks can ill-afford to lose.
The credit crunch has led to overdraft credit becoming more expensive, and when you consider that lenders have clamped down on credit card and unsecured lending, this has drastically diminished the average consumer’s ability to borrow, says Rod Logan, financial services analyst and author of the report, Datamonitor. Fee-paying current accounts may be the last thing that consumers want, but potentially by creating significant reductions in fees and charges for overdraft usage this would present a lifeline for those in serious financial difficulty. The remaining question is: which bank is going to move first?
L.D.