Overdraft debts 'more expensive than ever'

By Lucy Bower

Yesterday the Bank of England said that the average rate of interest on an authorised overdraft is currently 19.47%. The Daily Mail reports that this is the most expensive time to have an overdraft since records began in 1995.

If you had an overdraft debt of £1,000, you would pay on average just under £200 in interest over the course of the year. That's fairly expensive, but many people may pay additional fees and charges too - if they went over their overdraft limit, for example.

The increases in overdraft rates could put additional pressure on family finances at a time when many people are already financially stretched due to cost of living rises.

Sir Mervyn King, governor of the Bank of England, acknowledged this month that people are dealing with a 'ferocious squeeze' on their take home pay.

Repaying debt can be taxing enough, without the additional drain on your finances of a high rate of interest, and it appears that consumers are cutting back on debt. Latest figures from the Bank of England reveal that £377 million less was borrowed last month for things like credit cards, overdrafts and personal loans - which represents the biggest ever drop in monthly consumer credit lending.

Image © iStockPhotos / oversnap

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Tags: Bank of England, interest rates, overdraft, debt, loans, overdraft debt

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