Have an overdraft facility? You’re certainly not alone as this solution is used by millions of people across the country. However, two new laws are coming into effect which may dramatically change how you’re charged for this service.
This is important information as, potentially, these may make you financially worse-off.
Banks must now make clear that an overdraft facility is a debt. Instead of firms showing customers their available balances including their authorised interest amount, they will have to display this figure with the in-credit amount factored in.
For example, if you have an overdraft of £500 but you’re £100 in-credit, your balance would have indicated that you had £600 to spend. The recent changes though mean this figure will be only £100.
Following a ruling by the Financial Conduct Authority, daily and monthly overdraft fees will be prohibited from April. Although this has been welcomed by some consumer groups and charities, several banks have compensated for the change by increasing their overdraft rates – in some cases, by almost 40%.
The firms which have so far announced changes have been detailed below:
Monzo – Before, they would charge rates of 50p per day. This figure is now between 19% and 39% dependent on credit score.
Starling – Before, they would charge rates of 15%. This figure is now between 15% and 35% dependent on credit score.
Nationwide – Before, they would charge rates of 18.90%. This figure is now 39.90%.
HSBC – Before, they would charge rates of between 9.9% and 19.9%. This figure is now 39.90%.
M&S Bank – Before, they would charge rates of 15.90%. This figure is now 39.90%.
First Direct – Before, they would charge rates of 15.90%. This figure is now 39.90%.
If you use an overdraft on a regular basis, you might get a shock when you next check your bank balance. If it also looks like your finances are going to take a hit, then you should get in touch with us ASAP and we’ll strive to help find you a solution.