Around six in 10 (61%) people have no idea what their account provider’s overdraft charges are, a survey indicates.
Just 39% of people surveyed for app thinkmoney said they know what their provider charges for going into the red.
Women are particularly likely to be in the dark, with two-thirds (66%) saying they do not know what they are charged compared with 56% of men, according to the research, carried out by Clariti among 2,000 UK adults in August.
People typically estimate they fall into their overdraft for around four days per month, rising to around five days for younger adults aged 18 to 44.
Vix Leyton, a consumer finance expert at thinkmoney, said: “Overdrafts are a strange bit of borrowing because they can very quickly stop feeling like borrowing at all.”
She said they can be a “useful” short-term safety net, adding: “If payday regularly gets you back to zero rather than back into credit, your overdraft probably isn’t an emergency cushion anymore – it has become part of your monthly finances, and you need to know what that is costing you.”
As well as checking the overdraft rate, people could also see whether their account gives any interest-free buffer up to a certain amount, she suggested.
Ms Leyton said: “If you are dipping into it regularly, it is worth comparing your account with what else is available and looking at whether there is a cheaper way to borrow, whilst you work out what’s keeping you stuck in the mud.
“But if your overdraft is increasingly covering groceries, bills or other essentials, moving the debt around only deals with one part of the problem.
“That’s the point to look at what is causing the monthly shortfall and get support early if you need it.”
