Your bank's overdraft rates are changing - this is what you need to know

From 6 April 2020, the way you will be charged for your overdraft will change.

Under new guidance, banks and building societies will no longer be allowed to charge fixed daily or monthly fees for overdrafts.

This has been designed to make the costs of overdrafts clearer and easier for bank users to compare, with banks intending to charge a simple annual interest rate on arranged, and unarranged, overdrafts.

There will also no longer be higher fees for unplanned overdrafts than for arranged ones.

The financial conduct authority – which demanded that banks change the way charges were made after it emerged unarranged overdraft fees were costlier than payday loans – says that 70% of overdraft users will be “better off or see no change in cost.”

In 2017, firms made over £2.4bn from overdrafts alone, with around 30% from unarranged overdrafts. More than 50% of banks’ unarranged overdraft fees came from just 1.5% of customers in 2016.                           

Rochdale Online has rounded up the basics of the new changes for most of the major high street banks and building societies, but do check your account charges with your bank.

Nationwide – already in place

The interest rate is 39.9% per year for its current account, whether you have a FlexPlus, FlexDirect or FlexAccount.

There are no charges for unarranged overdrafts, but you'll need to bring your account back within your limit to use it again.

• www.nationwide.co.uk/products/current-accounts/our-current-accounts/tools-and-calculators/overdraft-calculator

HSBC – changes apply from 14 March 2020

The £5 daily usage fee for unarranged overdrafts (where it currently applies) will be removed.

Instead, you’ll be charged 39.9% EAR variable interest on the amount you borrow, whether you have an arranged or unarranged overdraft.

The monthly maximum charge for using an unarranged overdraft will be reduced to £20.

• www.hsbc.co.uk/content/dam/hsbc/gb/pdf/notice-of-variation-terms-and-conditions-and-charges-effective-mar-2020.pdf

First Direct – changes apply from 14 March 2020

You’ll be charged 39.9% EAR variable interest if you borrow more than £250, whether you have an arranged or unarranged overdraft.

The monthly maximum charge for using an unarranged overdraft will be reduced to £20.

Borrowing up to £250 is interest free.

• www1.firstdirect.com/content/dam/fsdt/en/documents/pdf/fdAccTandC_NOV.pdf

Barclays – changes apply from 22 March 2020

You’ll be charged 35% EAR variable interest on the amount you borrow over any interest free amount.

Barclays doesn’t offer unarranged overdrafts, but won’t charge any additional fees if your account enters an unarranged overdraft.

• www.barclays.co.uk/current-accounts/bank-account/new-overdraft-charges/

NatWest – changes apply between 27 March and 2 April 2020

The £6 arranged overdraft usage fee will be removed, and the £8 unarranged overdraft usage fee will also be removed.

However, the interest rate will increase to 39.49% for arranged and unarranged overdrafts for the following account holders: Select, Reward/Premier Reward, Reward Silver, Reward Platinum and Graduate.

Premier Select and Reward Black account holders will pay 19.49% interest on both arranged and unarranged overdrafts.

• personal.natwest.com/personal/current-accounts/overdrafts/pricing-changes.html

TSB – changes apply from 2 April 2020

You’ll be charged 39.9% EAR variable interest on the amount you borrow over any interest free amount, whether you have an arranged or unarranged overdraft.

The maximum monthly charge on unarranged overdrafts is being reduced from £80 to £30.

• www.tsb.co.uk/banking-charges-guide-012020.pdf

Santander – changes apply from 6 April 2020

Adult accounts will charge a rate of 39.9% EAR with the exception of the Choice Account (which will have a lower EAR of 29.9% with interest capped at £20 per month).

A monthly £10 charge applies for the Choice Account.

From 6 April, the bank will also be removing all unarranged charges and paid item fees. 

• www.santander.co.uk/personal/support/current-accounts/overdrafts

Halifax, Lloyds and Bank of Scotland – changes apply from 6 April 2020

Customers will be charged new “personalised” overdraft rates of up to 49.9% from April.

Daily fees will no longer apply, and most accounts will be charged a flat interest rate of 39.9% or 49.9% EAR on all overdraft borrowing.

• Halifax: static.halifax.co.uk/assets/pdf/bankaccounts/overdraft/HCC-guide-to-changes.pdf
• Lloyds: www.lloydsbank.com/assets/media/pdfs/current-accounts/overdraft/HCC-guide-to-changes.pdf
• Bank of Scotland: www.bankofscotland.co.uk/content/dam/bos-personal/assets/pdf/bankaccounts/overdraft/HCC-guide-to-changes.pdf

Read more:

• www.fca.org.uk/data/changes-overdraft-charges
• www.moneysavingexpert.com/news/2020/01/lloyds--halifax-and-bank-of-scotland-to-charge-up-to-49-9--inter/