Barclays to cut overdraft rate

Barclays is planning to cut the overdraft rate on its current account next month for the first time in five years.

The bank, which has some 8m current account customers, intends to cut the rate from 18.8% in June.

Martin Binder, head of current account product management, said the bank was also considering setting overdraft rates in a more personalised way rather than having a standard rate.

By deciding to cut its rate, Barclays would appear to be the first of "big four" to reduce their overdraft rate to below 18%.

New entrants into the current account market - particularly Halifax and Abbey National - have set their overdrafts at around 10% to break the traditional reluctance of bank customers to move their accounts.

NOP research, commissioned by the Halifax, found that the average customer was overdrawn for 80 days a year.

Barclays has recently introduced a new current account designed to reward "loyal" customers, which has a lower overdraft of 12%. The bank admitted yesterday that the rate for the current account used by the majority of its customers would be unlikely to fall to that level.

"Dropping interest rates from June seems overdue at the very least," said Anna Bradley at the National Consumer Council.