August 19 2016.

Borrowing money from your bank overdraft is more expensive than using payday loans, explains a report from consumer group Which?

Whilst payday loans are regularly criticised in the press for charging levels of APR that run in the thousands, the fees charged by the likes of Wonga and Quickquid are in fact less than what you pay with for an authorised or unauthorised bank overdraft from RBS, Santander, HSBC and other high street banks.

The cost of a payday loan was capped on 1st January 2015 to a maximum of £122.40 per £100 borrowed for a period of 28 days. This is still less than the £30 charged by authorised overdrafts and up to £90 charged for unauthorised overdrafts.

When using a credit card, you will be given a credit limit which is the amount you can spend each month and is based on your affordability, income and credit history. For instance, you can be given a credit limit of £4,000 per month and this is the maximum you can spend each month – and going over this will put you into your overdraft.

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