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London - British banks raked in more than £600m from consumers last year by hiking overdraft and credit card rates, according to price comparison service uSwitch.com
It said five banks, including Lloyds TSB and NatWest had
increased their agreed overdraft rates by an average 1.3% - netting themselves an extra £56m.
At the same time, the industry made £567m by increasing the interest charged on credit card purchases by a typical 1.2%.
The average authorised overdraft interest rate rose to 15.1% from 13.8% during the year, while the typical rate charged on credit card borrowing increased to 16% from 14.8%, uSwitch said.
It said the Royal Bank of Scotland and Lloyds TSB would make a further £18.4m at the expense of consumers in 2007 by increasing authorised overdraft rates as of this month.
Default fees in spotlight
Banks have been looking for other ways to boost their profit margins - such as increasing balance transfer fees and interest rates on credit cards - after the Office of Fair Trading said credit card default charges of more than £12 would be considered unfair.
The crackdown on the charges, that previously stood at £25 or more, has cost the industry more than £300m per year.
The OFT is also now examining current account default fees - charged when a customer slips into the red beyond the authorised overdraft, a cheque bounces or direct debit clears when there are insufficient funds in the account.
Liberal Democrat MP Matthew Taylor pressed ministers for action to stop High Street banks "ripping off" customers with "largely illegitimate" penalty charges.
Tough year for consumers
In December, the BBC's Money Programme estimated that it only costs a maximum of £4.50 to deal with any default charge on a current account as opposed to the average £30 currently being charged.
Nick White, director of financial services at uSwitch, said: "While the OFT's crackdown on credit card charges and the impending investigation into current accounts could be seen by many as a clear victory for consumers, banks have been quick to find new methods of recovering lost profits from their customers.
"2006 was a tough year for consumers who have had to be savvy to stay one step ahead of the banks," White said.
"Consumers will continue to be challenged by the banks - in order to stay one step ahead of the game in 2007 they must spend time searching as there are some great deals to be had."
Alliance and Leicester's Premier Direct current account offers the lowest authorised overdraft rate at 5.9% and Barclaycard's Simplicity platinum Visa offers the lowest purchase annual percentage rate at 6.8%.