Revealed the cost of new overdraft charges | moneyfacts.co.uk
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Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 08/01/2020

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.

Savings for those who go accidentally overdrawn

The findings show that those who use an unarranged overdraft in the future will face significantly lower fees with all the products and scenarios we reviewed charging the same or less under the new rules.
The average fee for an unarranged overdraft of £50 over seven days across nine accounts reviewed is £26.87 – under the new pricing this reduces to an average of 20p, while a larger unarranged overdraft of £500 across 30 days reduces from an average of £54.91 to £8.06.
The B Current Account from Clydesdale and Yorkshire Banks (no longer available due to the introduction of the Virgin Money Current Account) would have charged £42 for an unarranged overdraft of £50 for seven days. The new fees announced for the Virgin Money current account (which replaces the B Current Account) reduces this to 18p. Nationwide Building Society has reduced its unarranged overdraft fees to zero on their accounts FlexDirect and FlexAccount.
The maximum unarranged overdraft caps, also known as maximum monthly charges, have reduced from £80 to £20 on four of the accounts reviewed and Starling Bank has maintained their cap of £2.00.

Reductions in cost for small arranged overdrafts

Those who use an arranged overdraft of £50 over seven days will see their overdraft fee drop from an average of £1.99 to 18p, with five of the ten accounts reviewed now charging less under the new regime. The lowest fee for this arranged overdraft is from first direct and M&S Bank with no charge (thanks to their interest free tier) and a 13p fee from Starling Bank.

Higher charges for those who regularly use a larger arranged overdraft

The average fee for an arranged overdraft of £500 over 30 days increases from £8.96 to £10.29 across the ten accounts reviewed. Of these, six have increased in cost, three have reduced and one has remained the same. Some of the greatest increases come from first direct, Nationwide Building Society FlexAccount and HSBC Advance, whose fees increase by 130%, 95% and 77% respectively.
The cheapest fees for a £500 arranged overdraft for 30 days across the eight products reviewed was from Starling Bank at £5.78.
HSBC is introducing a new £25 interest free tier, while M&S Bank is increasing its £100 interest free tier up to £250. first direct retains its £250 interest free tier.

Comparing the cost of an unarranged overdraft now and under the new rates

 

Provider  Account/Option Name  Old unarranged overdraft charges New unarranged overdraft charges
Interest rate (EAR) Usage fee per day Total cost for £50 over 7 days Total cost for £500 over 30 days effective from date Interest Rate (EAR) Total cost for £50 over 7 days Total cost for £500 over 30 days
Barclays Bank Bank Account            0.00%            £0.00           £0.00              £0.00 22/03/2020            £0.00            £0.00            £0.00
first direct 1st Account 0.00% £5.00 £35.00 £80.00 14/03/2020 39.90% £0.33 £13.99
Halifax Reward Current Account            0.00%            £0.00             £0.00             £0.00 06/04/2020            0.00%             £0.00             £0.00
HSBC Bank Account 0.00% £5.00 £35.00 £80.00 14/03/2020 39.90% £0.33 £13.99
HSBC Advance 0.00% £5.00 £35.00 £80.00 14/03/2020 39.90% £0.33 £13.99
Lloyds Bank / Bank of Scotland Classic            0.00%            £0.00             £0.00             £0.00 06/04/2020               £0.00             £0.00
M&S Bank M&S Current Account            0.00%            £0.00             £0.00             £0.00 14/03/2020 N/A N/A N/A
Metro Bank Current Account         15.00%            £0.00             £0.13             £5.78 01/04/2020         19.00%             £0.28          £12.18
Monzo Bank Monzo Current Account 0.00% £0.50 £3.50 £15.00 01/04/2020 19.00% £0.17 £7.20
Nationwide BS FlexAccount 18.90% £0.00 £0.17 £7.17 11/11/2019 0.00% £0.00 £0.00
Nationwide BS FlexDirect 0.00% £5.00 £35.00 £50.00 11/11/2019 0.00% £0.00 £0.00
NatWest / Royal Bank of Scotland Select Account 0.00% £8.00 £56.00 £80.00 02/04/2020 39.49% £0.32 £13.87
Santander 123 Current Account            0.00%            £0.00             £0.00             £0.00 06/04/2020            0.00%             £0.00             £0.00
smile Current         18.90%          £10.00          £60.00          £60.00 04/04/2020         35.90%             £0.30          £12.77
Starling Bank Current Account 15.00% £0.00 £0.13 £2.00 01/04/2020 15.00% £0.13 £2.00
The Co-operative Bank Current Account         18.90%          £10.00          £60.00          £60.00 04/04/2020         25.90%             £0.22             £9.56
TSB Classic Plus         19.84%          £10.00          £76.17          £80.00 02/04/2020         39.90%             £0.33          £13.99
Virgin Money / Clydesdale Bank / Yorkshire Bank Virgin Money Current Account^ 0.00% £6.00 £42.00 £100.00 12/12/2019 19.90% £0.18 £7.52

^Old overdraft charges based on B Current Account which was withdrawn from sale on 29th November 2019.

Comparing the cost of an arranged overdraft now and under the new rates

 

Provider  Account/Option Name  Old arranged overdraft charges New arranged overdraft charges
Interest rate (EAR) Usage fee per day (unless otherwise stated) Total cost for £50 over 7 days Total cost for £500 over 30 days Effective from date Interest Rate (EAR) Total cost for £50 over 7 days Total cost for £500 over 30 days
Barclays Bank
Bank Account            0.00%             £0.75            £5.25          £22.50 22/03/2020         35.00%             £0.29          £12.49
first direct 1st Account 15.90% £0.00 £0.00 £3.05 14/03/2020 39.90% £0.00 £7.00
Halifax Reward Current Account            0.00%             £0.01            £0.56          £24.90 06/04/2020         39.90%             £0.33          £13.99
HSBC Bank Account 17.90% £0.00 £0.16 £6.81 14/03/2020 39.90% £0.16 £13.29
HSBC Advance 19.90% £0.00 £0.18 £7.52 14/03/2020 39.90% £0.16 £13.29
Lloyds Bank / Bank of Scotland Classic            0.00%             £0.01            £0.56          £24.90 06/04/2020         39.90%             £0.33          £13.99
M&S Bank M&S Current Account 15.90% £0.00 £0.00 £4.88 14/03/2020 39.90% £0.00 £7.00
Metro Bank Current Account         15.00%             £0.00            £0.13             £5.78 25/04/2020         34.00%             £0.28          £12.18
Monzo Bank Monzo Current Account 0.00% £0.50 £3.50 £15.00 01/04/2020 19.00% £0.17 £7.20
Nationwide BS FlexAccount 18.90% £0.00 £0.17 £7.17 11/11/2019 39.90% £0.33 £13.99
Nationwide BS FlexDirect 0.00% £0.50 £3.50 £15.00 11/11/2019 39.90% £0.33 £13.99
NatWest / Royal Bank of Scotland Select Account 19.89% £6.00** £6.18 £13.51 02/04/2020 39.49% £0.32 £13.87
Santander 123 Current Account            0.00%             £1.00            £7.00          £30.00 06/04/2020         39.90%             £0.33          £13.99
smile Current         18.90%             £0.00            £0.17             £7.17 04/04/2020         35.90%             £0.30          £12.77
Starling Bank Current Account 15.00% £0.00 £0.13 £5.78 01/04/2020 15.00% £0.13 £5.78
The Co-operative Bank
Current Account         18.90%             £0.00            £0.17             £7.17 04/04/2020         35.90%             £0.30          £12.77
TSB Classic Plus         19.84%          £35.00            £6.05          £12.97 02/04/2020         39.90%             £0.33          £13.99
Virgin Money / Clydesdale Bank / Yorkshire Bank Virgin Money Current Account^ 12.50% £6.00** £6.11 £10.86 12/12/2019 19.90% £0.18 £7.52

*different fees apply to higher borrowing amounts.

^Old overdraft charges based on B Current Account which was withdrawn from sale on 29th November 2019.

**Fee is per month

Why are overdraft fees changing?

On April 6 2020, new rules come into effect with the aim of simplifying the fees many consumers face when they enter an overdraft. The rules from the FCA include banning fixed fees such as daily, weekly and monthly overdraft usage charges and stopping banks and building societies from charging higher interest rates for unarranged compared to arranged overdrafts.

There is more information about the new overdraft rules and how overdrafts work in general in our guide to overdrafts.

Find a bank account with an overdraft.

More information:

For more information about bank accounts with overdrafts take a look at our guide on How does a current account overdraft work?.

You can also view all the bank accounts with overdrafts currently available by visiting our accounts with overdrafts chart

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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