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Barclays will raise overdraft rates to 35% but some will pay less for borrowing


Barclays is the latest high street bank to change overdrafts… will its 35% rate really mean a large chunk of customers will pay less?

  • Bank currently charges a tiered rate on borrowing
  • It costs 75p a day up to £1,000, £1.50 from £1,000 –  £2,000, and £3 above that
  • The 35% rate means those who borrow smaller sums for shorter will pay less 

Barclays has become the latest high street bank to switch its overdraft to a single interest rate and it appears many will actually be better off under the changes.

This is because the banking giant is moving from a tiered rate – where customers pay a daily fee according to how much they borrow – to a flat 35 per cent interest rate.

The changes will come into force on 22 March and the bank will also keep in place its £15 buffer for basic bank account holders.

Next up: Barclays has said it will raise overdraft rates to 35% from 22 March

While the majority of banks which have altered their overdrafts to comply with regulatory rules have raised the cost of arranged borrowing to make up for the fact they can no longer charge more to those who go use unarranged overdrafts, Barclays’ rules could end up cheaper for some customers. 

After exceeding your £15 buffer, the bank currently charges 75p per day up to £1,000 of borrowing, £1.50 on sums between £1,000 and £2,000, and £3 a day on over £2,000.

Currently, someone who borrowed £250 for three days would pay £2.25, while from 22 March they would pay 62p.

Someone who borrowed £600 over four days currently pays £3, while after the changes they would pay £1.98. 

Finally, someone who borrowed £1,200 for six days would currently pay £9, and would pay £5.93 after March.

Barclays doesn’t currently offer an unarranged overdraft – it returns any transaction that takes a customer over their arranged limit.  

The move also makes Barclays one of the few overdraft providers which have so far announced changes not to raise the cost of borrowing to 39 per cent. 

HSBC, First Direct, Nationwide, RBS and NatWest have all previously brought in overdraft rates of nearly 40 per cent.

Which banks have hiked their overdrafts so far? 
Bank account  Old overdraft rate New rate  Fee-free buffer? 
Nationwide FlexAccount 18.9%  39.9%  No
HSBC Advance  17.9%  39.9%  Yes – £25 
First Direct First  15.9%  39.9%  Yes – £250 
M&S Bank  15.9%  39.9%  Yes – £250 
RBS/NatWest Select  19.89% (plus £6 monthly fee)  39.49%  No 
Monzo  50p per day above £20 19%/29%/39%  No 
Starling   15% 15%/25%/35%  No 
Barclays Bank Account  Tiered rate  35%  Yes – £15 

Earlier this week the Financial Conduct Authority sent out a statement defending its crackdown on unarranged overdraft fees following RBS and NatWest raising their arranged borrowing costs to 39.49 per cent, with some blaming the regulations for banks hiking rates.

The FCA said: ‘Our reforms are fixing a market where too often the vulnerable were missing out because of complex and disproportionate charges, especially for unarranged borrowing.’

Barclays is reducing fee-free overdrafts for premier and packaged account customers to £200, from £1,000.

This means that people that dip into the red beyond £200 will pay interest from March. Its student account will still have a £3,000 fee-free buffer. 

A Barclays spokesman said: ‘We want to help our customers manage their money with transparency and ease.

‘This is another step towards offering our customers greater control over their finances, alongside our existing alerts and the huge range of tools within our app.’

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