The 'limit alert' text service will warn customers if they are within £50 of going overdrawn. Another alert will be sent if they go over the limit or a payment, like a standing order, cannot be made.

In a statement, Ian Larkin, MD, consumer banking, Lloyds TSB, says: "We want to help our customers avoid accidentally slipping into the red and are giving them the tools to do just that. We understand that it can sometimes be difficult for customers to keep tabs on their account and we want to make it easier."

The bank already offers customers a free weekly balance update via text message. Lloyds says its new limit alert service will be offered free until the end of the year, but will then cost £2.50 a month.

Lloyds says a poll of 2510 adults carried out by YouGov found that two thirds of people who had gone over their limit in the past said that they hadn't known that they were about to slip into the red. Around three quarters - 72% - of those asked thought that a text alert would be a good way to receive the warning.

However Lloyds TSB has been attacked for imposing a £30-per-year fee for its 'limit alert' SMS service. Responding to the move, Steve Shore at Internet bank cahoot, says: "We already offer a free text or email alert when your balance is getting close to a certain limit (this can be set by the customer) or when a large transaction occurs. This provides peace of mind and avoids dipping into your overdraft."

The new text service is part of a package of measures - which includes reduced interest rates and charges for unauthorised overdrafts - that Lloyds TSB is implementing ahead of the test case on allegedly unfair overdraft charges being brought by the Office of Fair Trading (OFT). The hearing is due to take place in January, with a ruling expected in February.

Last week HSBC said it was programming its ATMs to tell customers when a cash withdrawal would cause them to exceed their overdraft limit.

From 1 October, all 3500 HSBC ATMs will tell the bank's current account customers that they may incur a service fee if they go ahead with a cash withdrawal that takes them over their agreed overdraft limit.