Five million Brits 'permanently overdrawn'

Five million Britons are permanently overdrawn, and rising inflation could force more to live on their overdrafts, says product comparison website moneysupermarket.com . The website's research shows one in 10 current account customers were overdrawn the year round, a further 12% drop into the red at least five times a year, while 38% of current account customers have used their overdraft at least once during the past year. However, these figures are a big improvement on 2008, when moneysupermarket.com found that 17% of British adults were permanently overdrawn, a further 15% used their overdraft five times or more a year, and a total of 52% relied on their overdraft at least once during the 12-month period. Kevin Mountford, head of banking at moneysupermarket.com, said: "While it is encouraging to see less and less people reliant on their overdrafts, we should be concerned that there are still such a large number of people permanently overdrawn. "With rising inflation, it is going to be difficult for many to break the habit of living in the red, and it may be that more people will fall back into this position as living costs increase." Analysis by the website shows that those going into the red on a regular basis need to be careful about which current account they use or they could end up being even more out of pocket. A Halifax Reward current account is the cheapest for customers who go overdrawn by £500 for just five days a month, as the overdraft charge of £1 per day for debit balances under £2,500 will be covered by the £5 monthly payment the bank pays to account holders who pay in £1,000 a month. By contrast, Alliance & Leicester's Premier Direct account is one of the most expensive, costing £2.50 a month or £30 a year. Santander Preferred Overdraft account would charge the same customer £10.80 a year, Barclays bank account £15.87, Nationwide BS FlexAccount and Lloyds TSB Classic account Plus £15.60, NatWest Current Plus £16.20 and HSBC bank account £16.80. But the positions are reversed for those who are overdrawn permanently for a whole year. Halifax's fixed daily rate the makes it one of the most expensive, with borrowers clocking up £300 in charges, while Alliance & Leicester is one of the cheapest, costing £60 a year. Santander would again be the second cheapest in this list charging £64.80, Barclays £95.22, Nationwide BS and Lloyds TSB £93.60. NatWest £97.20 and HSBC £100.80. Kevin Mountford added: "The charges attached to overdrafts have been at the forefront of the news agenda over the last couple of years, with the courts eventually deciding the banks can penalise those who go overdrawn in whatever way they choose , without interruption from the Office of Fair Trading (OFT). "The dangers of being overly, or entirely, reliant on your overdraft are clear; firstly this can be an extremely expensive debt to carry if it hasn't been agreed with your bank in advance, and secondly your bank can reduce the size of your overdraft with little warning."