Almost one in five (18.8%) people in the UK, equating to around 10 million people, are £697 overdrawn each day, research by TotallyMoney has found.

The finance group also suggested that there are better ways for consumers to borrow money, with high street banks charging customers between 35% to 39.94% APR.

Taking the average balance and a typical rate of 39.9%, a customer would pay £278 in overdraft interest each year. For those spending an average of 20 days overdrawn by £1,000, they will pay £262.30 in interest.

In order to avoid these charges, TotallyMoney said that using savings to clear overdrafts or gaining a credit card with interest-free credit on purchases, provides a much more cost-effective way to pay when compared to an overdraft.

Chief executive officer at TotallyMoney, Alastair Douglas, said: "For some, overdrafts are a ghost debt — there’s no separate card, account, or app — and if you’ve been with your bank for years, you might not remember ever applying for one. That means you might not even really notice if you’re using it, especially if you don’t regularly check your bank statements. But the truth is, overdrafts are credit products, and just like a loan or a card.

"By avoiding expensive overdraft fees, you’ll be able to get out of debt quicker, save money and start moving forwards. Whether that means having more money to spend on yourself each month, or saving for a rainy day, you’ll be unlocking a life of more choices.”

Personal finance expert at moneycomms.co.uk, Andrew Hagger, added: "Paying almost 40% for an agreed overdraft is an expensive way to borrow, particularly if it’s for more than the odd day here and there.

"Using a credit card is a smarter and more cost-effective way of managing your cash flow these days, even more so if you’re able to clear your statement balance in full each month.

"It’s easy to fall into the habit of relying on your overdraft month after month and the high cost just puts even greater pressure on your monthly finances."

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