Overdraft fees are set to change in April this year, following a new ruling by the Financial Conduct Authority (FCA). With the new changes set to come into place from April 6, current account providers are required to make changes to their overdrafts, as Martin Lewis explained today.
Speaking on This Morning, the financial journalist explained how all fixed daily and monthly arranged overdraft fees are to be banned and replaced with a single overdraft interest rate.
What’s more, banks will no longer be allowed to charge more for busting the arranged overdraft limit.
“It’s taken a decade but this will mean the end to unfair bank charges that take billions each year from some of the most desperate can end,” the Money Saving Expert founder has said.
“Banks however can still refuse to make a payment if you go over your arranged overdraft limit, but these charges, must now be reasonable, costing the customer roughly what the bank or building society pays to refuse the payment.”
Ahead of the ruling coming into effect in April, a number of banks have announced their changes to interest rates on overdrafts.
However, not all banks have revealed their charges.
Today, the Money Saving Expert founder explained what is known “so far about chargeable overdrafts changes”.
It was also explained that “many have buffer zones where you can go a small amount overdrawn without charge”.
Nationwide: It already changed last November from 50p/day to 39.9 percent annual interest
HSBC was 19.9 percent, from March 14 will be 39.9 percent
First Direct was 15.9 percent, from March 14 will be 39.9 percent
M&S Bank was 15.9 percent, from March 14 will be 39.9 percent
Barclays was 75p+/day, from March 22 will charge 34.9 percent
NatWest was 19.9 percent and £6/month, from April 1 it’ll charge 39.9 percent
RBS was 19.9 percent and £6/month, from March 27 it’ll charge 39.9 percent
Santander was £1-£3/day, from April 6 will charge 39.9 percent
Starling was 15 percent, from April 1 will charge 15-35 percent
Monzo was 50p/day, from April 1 will charge 19-39 percent
So, what do the new rates mean for savers? Will it mean everyone pays more?
Mr Lewis commented: “No, there are winners and losers.
“Take for example if you were only £20 overdrawn with NatWest for one day, under the old charges you’d pay £6.01, but under the new system you’ll pay a few pennies, so it’s a big win.
“The rule of thumb is if you only go into you arranged overdraft a little, and not for long, you’ll win.
“Yet perversely as typical credit cards only cost 19 percent annual interest, and overdrafts are 40 percent, if you have both debts you’d be better to pay the minimum on the credit card and focus on reducing the overdraft first, and once that’s gone try to clear the credit card.”
Read more information on cutting overdraft costs, in Martin’s “How to cut your overdraft to zero percent guide” at MoneySavingExpert.com.
This Morning airs weekdays on ITV from 10am.