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The current economic climate means that many people, including those who have never needed an overdraft before, may be forced to rely on one now. Banks may be receiving more borrowing business from hard-up customers, but the current practices of major lenders continue to force more debt onto those who can least afford it.

The average rate that banks are charging for an authorised overdraft continues to rise, even though the Bank of England has cut Bank Rate to an all-time low of 0.5 per cent. The Bank of England’s own figures reveal that overdraft rates are now at their highest level since 1997.

Recently the UK’s largest building society Nationwide increased the interest rate on its overdrafts again - the third time in 12 months. The current rate that Nationwide are charging is almost double the rate that borrowers were paying a year ago.

Nationwide customers will now pay 18.9 per cent AER (annual effective rate) if they go overdrawn. This is a recent rise of one per cent and a substantial increase on the 9.9 per cent that was in place last June.

Similar overdraft increases were announced by Barclays last week, increasing the overdraft rate on its Additions Active account by nearly a third, from 9.6 per cent to 12.9 per cent.

According to experts, these are the latest example of banks’ and building societies’ efforts to recoup lost profits by quietly increasing customer charges and interest rates. These actions by the banks have led many consumers to seek debt consolidation to minimise the cost of the current credit they are paying.

Many people rely upon their overdraft every month and have little idea how much it is actually costing them. A poll from 2008 by the Office for National Statistics discovered that two out of three people with an overdraft facility don’t know what they’re being charged.

If you rely on an overdraft what can you do?

With many experts predicting that credit providers will make similar increases to those announced recently by Barclays and Nationwide, the cost to consumers could continue to rise.

According to Andrew Haggar of the comparison service Moneynet, “Banks and building societies will be facing pressure on profit margins due to increased levels of bad debt and it’s highly likely that other providers will increase borrowing rates before the summer is out.”

If you rely on an overdraft to get by each month, then a review of your finances could make a big difference. Reading the terms and conditions of your current agreements can also reveal pieces of information that allow you to see where your money is going.

If the terms are not in your favour then don’t be afraid to shop around. Switching banks is a relatively painless process and, if you find a new bank willing to take on your overdraft, then you don’t have to pay off your existing one immediately, securing a more favourable rate in the process.