Current account holders 'facing interest rate pincer movement'

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Current account holders 'facing interest rate pincer movement'

Mon 8th Dec 2008

Consumers with current accounts are finding themselves trapped between lowering in-credit interest rates and rising charges for going overdrawn, according to a price comparison website.

Research by moneysupermarket.com revealed that high street banks have cut interest rates on their current accounts by an average of 1.29 per cent but at the same time have raised the rate of interest charged on overdrafts by an average of 1.1 per cent.

Kevin Mountford, head of banking at moneysupermarket.com, said that banks had used the Bank of England's reduction in the base rate of interest as an excuse to cut their own interest rates but said that overdraft rates should have fallen by a similar amount.

He added: "The wide discrepancy between in-credit and overdraft rates is hard to justify and the way some banks have used base rate cuts to widen the margin is very disappointing."

Last week, the government proposed making the banking code of conduct legally binding, which would give the Financial Services Authority the power to impose potentially unlimited fines on banks that are acting "unfairly".

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