Exposed: how banks cheat you on interest

A crackdown on "secret" charges worth tens of millions of pounds extracted from customers by the High Street banks was announced today.

The banks are coming under scrutiny for the two-day period they sit on customers' money without paying them any interest every time a payment is made over the internet, over the phone or by standing order.

The Office of Fair Trading said it was launching a review of the practice and called for far greater transparency in the way banks "look after" customers' money when it is being transferred into another account.

The OFT estimates that the practice is already costing bank customers at least £30million a year. However, the total figure is thought to be much larger if the period that banks "sit" on cheques in the clearing system is included.

The OFT move comes at a time of unprecedented profits for the British banking industry, triggering charges of "outrageous profiteering" from consumer groups.

Next week, Britain's biggest bank HSBC is expected to unveil a 21 per cent higher profit of around £7.5 billion - easily the biggest ever for a High Street bank. This will eclipse the current record of £6.16billion announced last week by the Royal Bank of Scotland, which owns NatWest.

The OFT also demanded today that cheque payments into accounts start paying interest the second day after the transaction.

But the Consumers Association said it will demand greater changes during the current review of bank practices.

"We would say that in this day and age, with all the technology we have, that transactions should happen instantaneously," said a spokesman.