The Office of Fair Trading (OFT) has announced it is going to turn its attention to the fees charged by current account providers when customers go overdrawn.

The investigation into overdraft charges follows a successful examination into excessive credit card penalty charges. In April the consumer watchdog told credit card companies to reduce penalty fees to a maximum of £12, subsquently issuers have slashed their fees, the majority by almost half.

The way customers who dip into their unauthorised overdrafts are charged varies considerably between banks. Most current accounts have a free buffer zone of around £100 - if you go overdrawn above that, you're likely to be charged a one-off fee and higher interest rates.

Research by financial analyst Moneyfacts suggests the danger for individuals who dip into an unauthorised overdraft is picking a bank that is unsympathetic to small amounts of debt. For instance a Lloyds TSB customer with a Classic Plus account who has an unauthorised overdraft of £1 for one day will be stung with a large penalty of £30 per day - up to a maximum of £90 per month - and pay interest of 29.8%.

The OFT will carry out a three to six-month "fact finding exercise", looking for evidence of unfair charges. The will ask banks and building societies to justify the estimated £40m-a-year paid when current account customers go over their agreed overdraft limit. Banks typically charge £20 to £30 for unauthorised overdrafts, and another £25 to £30 for any standing orders, direct debits paid or cheques honoured when the customer is over their limit.

In the course of their investigation the OFT will liaise closely with the Financial Services Authority (FSA) and hold discussions with the British Bankers' Association (BBA) to ensure that distinctive features of retail banking and the circumstances in which default charges are applied are identified and taken into account.

John Fingleton, OFT chief executive, said: "The reduction of default charges on credit cards is great news for consumers. We are now extending our work to account default charges."

The British Bankers' Association chief executive Ian Mullen said: "We do not accept the principles the OFT is applying to credit card administration charges, or that such principles apply to bank overdrafts. The majority of customers do not pay fees if in credit, unlike the vast majority of developed economies."