People being pushed into their overdraft by bank charges

The majority of bank account holders in the UK do not pay for the service, but many others do and this is causing them to fall into debt in some cases.

This is according to new research from thinkmoney, which found over a third of individuals (36 per cent) typically go overdrawn at some point in the month.

While this is not a problem for those with an authorised overdraft, some accounts have usage fees for the service and if you do not have an policy agreed, the charges can be large.

Some 42 per cent of account holders have paid charges at some point in their lives and of these, more than half (57 per cent) have been pushed overdrawn again when bank fees were applied, leading to a vicious circle. 

On average, current account customers paid £46.84 in bank charges in a year – but around one in six (16 per cent) forked out more than £100.

There are currently two main types of unauthorised overdraft charges: daily usage fees, which are applied by some providers, and fees for returned items such as unpaid Direct Debits and standing orders. 

The research looked at some of the free in-credit accounts on the market and revealed some have a £10 daily usage fee if you are overdrawn by more than £25. This is capped at eight days so you could be charged up to £80 per month.

Some services come with a £5 daily usage fee, which is capped at 20 days, meaning people could be billed by up to £100 a month.

Being charged this amount makes it incredibly difficult to get out of the debt you started with and in many cases the fees are much more than the actual amount of money owed.

Ian Williams, director of communications at thinkmoney, said: "Even a short period of financial instability that pushes you into an unauthorised overdraft can spell large charges. This can make it difficult to get out of your overdraft – which, in turn, can trigger more charges."

By Amy White