Santander will double overdraft charges in a bitter blow to its five million current account users.

The bank, which has come bottom of all our customer service polls over the past 18 months, will charge £1 a day, rather than the current 50p a day, from March for customers who are within their agreed limit.

The Spanish giant offers many switchers a fees-free overdraft in their first year. Anyone who switches to a no-fee overdraft deal now won't be affected initially as they pay nothing anyway, but anyone approaching their anniversary could soon be hit by increased charges.

The move comes after banks agreed a voluntary code, under pressure from the Government, late last year to help customers limit overdraft charges by introducing a buffer and alerting them when close to their limit.

Santander has implemented these changes but, on first glance, they are at the cost of higher charges, though the bank says the fees reflect "market conditions".

There is no change to the cost of exceeding an overdraft limit which stays at £5 per day while overdrawn, plus other fees of up to £25 per bounced payment.

Santander overdraft charges explained

The new charges apply to all accounts where a fee is charged for going overdrawn, which represent the vast majority. The number of times a fee can be charged in any month will be capped, but some users could still pay £20 a month.

The new fees from 16 March are:

  • The daily fee when within an arranged overdraft rises from 50p to £1.
  • Capped at 10 fees per month on the following accounts: Preferred, Reward, Travel Reward, Family Reward, Premier 50,
    Premier 21 and Choice.
  • Capped at 20 fees per month on the following accounts: Everyday, Preferred In Credit/Overdraft Rate, Premier Direct,
    Premier Current and Current Account.
  • The cap on the Preferred Overdraft Rate Account has risen from 15 to 20 fees per month. All the other caps above are the same as now.

On Santander's Zero account interest is charged rather than a fee. This rises from 13.9% to 18.9% on 16 April.

Dan Plant, money analyst, says: "Going a couple of quid over the buffer into the red for a few days could now see you being charged massive sums relative to what you've borrowed.

"Anyone who'll be smacked by these doubled charges should cut and run from Santander as soon as possible – the new fees will rapidly mount and hit your pocket.

"Worst case scenario is they push you into even more horrid unauthorised overdraft bank charges – but you can easily switch to other accounts that are interest-free."

Buffer zone

Santander introduced a buffer from 20 December 2011 on all accounts, so anyone £12 into an overdraft or £12 over their limit won't get the relevant fees. Customers also now have until 4pm each day to credit their account with necessary funds to avoid fees.

Santander also recently launched an alert service so customers are told when their balance gets below a defined amount.

One in five Santander customers, around a million, regularly use their overdraft.

Liz Chang, director of banking at Santander, says: "We are committed to helping our customers manage their finances more closely and the clear and transparent changes we are making demonstrate this.

"By charging no fees on overdrafts of £12 or less and giving customers time each day to return their account to an arranged overdrawn or credit position, we are helping them to manage those occasions where they are only a few pounds overdrawn."