Money Mail investigation has revealed how sky-high overdraft charges that are equivalent to an annual interest rate of 53 million per cent are pushing cash-strapped borrowers into the arms of payday lenders. Bank customers who run out of cash and are forced into the red must pay three times more for borrowing £200 for ten days in a current account than if they had taken a payday loan. The baffling and expensive charges are forcing many to use alternative lenders — whose up-front fees appear to be clearer and cheaper — but their tactics have been heavily criticised by MPs.

Last week, a report by the Office Of Fair Trading (OFT) revealed how banks are squeezing nearly £2 billion a year from customers who use unauthorised overdrafts. ‘The huge overdraft fees charged by banks mean they are pushing customers out of the frying pan and into the fire of payday lending firms,’ says Laura Willoughby, chief executive of campaign group Move Your Money. ‘The banks are simply not being fair to customers. This utter lack of transparency about charges means people simply don’t have the right information to make the best decisions about their money.’.....Read more here