Top Banking News

Derin Clark

Derin Clark

Online Reporter
Published: 22/01/2020

Lloyds Banking Group and TSB are the latest banks to announce changes to their overdraft fees, which will see some borrowers being charged 49.9% for going into their overdraft.
Lloyds Banking Group, which includes high street brands Lloyds, Bank of Scotland and Halifax, has changed its overdraft fees so that from the 6 April 2020, customers will be charged a flat rate of 39.9% or 49.9% EAR on all overdraft borrowing, while Club Lloyds customers will be charged either 27.5% or 49.9%. The rate customers are charged depends on existing information the bank holds about the customer’s credit history and how they operate their account.

The bank has also revealed that it is dropping the interest-free tier on some accounts to just £50, however it has not stated which accounts will be impacted.

Lloyds Banking Group has stated that the majority of its customers will be charged the lower rate, with many paying less on the new overdraft fee charges than its current charges, however it means that for many consumers it will be cheaper to borrow on a credit card instead.

Santander is the latest bank to announce changes to its overdraft fees in response to the Financial Conduct Authority’s (FCA) banning of fixed fees on overdrafts.

Today the bank has announced that from 6 April 2020, all its on-sale adult accounts will charge a rate of 39.9% EAR, except its Choice Account, which will have a lower EAR of 29.9%. In addition to this, Santander will also remove all unarranged charges and paid item fees.
While the Choice Account will have a lower overdraft fee, with interest capped at £20 per month, it does have a monthly charge of £10, which means customers will pay a maximum of £30 per month.

With many banks making changes to their overdraft rates, these changes from Santander will put the bank’s overdraft fees in-line with many of its competitor’s rates.

Susan Allen, head of retail banking at Santander, said: “The new single interest rate, combined with the removal of all other overdraft charges from our personal current accounts, provides clear and simple overdraft pricing for our customers, with the vast majority of customers paying less and a daily fee of just 9p per £100 borrowed.

“But we know that helping people manage their day-to-day finances effectively goes beyond simplifying overdraft pricing. We have a range of support services in place – from our over-the-phone experts to our in-branch workshops – and would encourage any customers who would like help in understanding the impact of these changes, or any other aspect of managing their money to get in touch.”

Barclays has announced that it is making changes to its overdraft fees that will see many of its customers with an arranged overdraft fee better off.

TSB has increased the amount customers can earn through its ‘refer a friend’ offer and is now offering £100 for each referral.

Existing TSB customers can earn the £100 – which increased from TSB’s previous offering of £75 – when they refer a friend or family member who switches from their current bank to TSB’s Classic or Classic Plus account. Customers can refer up to five friends and earn up to £500 through this offer. Friends and family members who are referred will also receive £100 when they join TSB.

Those wanting to take up this offer will have to act quickly as it ends on 28 February 2020.
Commenting on the increase in the ‘refer a friend’ offer, Craig Bundell, director of everyday banking at TSB, said: “Giving something back to our customers has always been important to us and with only a few weeks left before the offer ends, we want to give more back to our customers – particularly at this time of year when most are recovering from Christmas and New Year finances.

“Since the launch of the offer in April 2019, we’ve given customers and their friends and family over £1m, so I’m delighted that we can continue to reward our existing and new customers in this way.”

Moneyfacts.co.uk has found that consumers could be paying over twice as much for arranged overdrafts following our review of new overdraft charges announced by eight banks and building societies.
These new charges are in response to the rules announced last year by the Financial Conduct Authority (FCA) which forbids interest rates for unarranged overdrafts to be higher than arranged overdrafts. The new FCA rules come into force on 6 April 2020, but some providers have already introduced or announced updated overdraft fees.

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