Despite the all-time low base rate of 0.5%, banks are charging customers the highest overdraft rates since 1995, when the Bank of England started collecting this data.
This is Money has reported that the average authorised overdraft rate has reached a high of nearly 40 times the base rate, at 19.52%. This means that if you took out an overdraft of £1,000 for one year, you would have to pay £195 in interest.
The Bank cut the base rate to 0.5% in 2009, and the average authorised overdraft rate was then 18.62%. Since then, it has been climbing steadily, reaching 19.52% last month.
An expert from thinkbanking commented: "These recent figures could make people really worried about using their overdraft to borrow money. More problems can arise when customers accidentally go into their unauthorised overdraft, which could mean they have to pay a lot in fees.
"The best way to avoid being saddled with an expensive overdraft is to ensure that your bank account is always 'in credit' - which is, of course, often easier said than done. The thinkmoney Personal Account does not have an overdraft facility, so it is simply not possible to go overdrawn on a thinkbanking account.
"The thinkmoney Personal Account is also a managed account: we help you keep on top of all your monthly payments by separating your money into two accounts. One account is for your 'essential' costs, like bills and your mortgage or rent. The other contains your spending money, which you can use however you like without worrying that you're spending money you need for your essentials."