Millions to pay up to 40% interest on overdrafts starting today – but some banks have delayed increases – The Sun

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New overdraft rules come into effect today, according to which banks charge up to 49.9% interest – but some have delayed price increases due to the coronavirus crisis.

Beginning April 6, banks are prohibited from charging daily or monthly overdraft fees, although they may still charge interest rates.

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    Some banks do not lower interest rates to help troubled borrowers
Some banks do not lower interest rates to help troubled borrowers

This saw major banks and mortgage companies reveal that they would charge up to 49.9%.

But while these rules were set by the Financial Conduct Authority (FCA) last week, she said she wants suppliers to ensure that short customers are not worse off than they are charged before the changes.

Three in ten people – 7.8 million – will be worse off because of the new rules.

Under the new temporary guidelines on coronaviruses, the FCA also wants providers to offer interest-free overdrafts of £ 500.

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He is currently in consultation on the proposals with a plan to be implemented by the end of this week.

In the meantime, however, some banks have delayed introducing new interest rates or cutting rates for the next few months.

Here’s what’s going on.

Which banks delayed overdraft changes or lowered rates?

As you can see from the table above, Barclays, First Direct, HSBC, NatWest, RBS and Santander have all revealed plans to temporarily reduce the interest charged on overdrafts.

Barclays

Barclays began charging customers 35% interest on March 22, but on March 27 it automatically waived all interest on its arranged overdrafts.

It will be in place until April 30 and it is considering measures for after that.

Until March 22, Barclays charges daily overdraft fees.

First Direct

First Direct presented its new 39.9% overdraft rate on March 14 as planned.

He says he plans to temporarily reduce the rate, but has yet to confirm when it will happen or what rate he will charge.

Until March 14, First Direct billed 15.9% on arranged overdrafts and daily fees on unordered overdrafts.

He continues to offer an interest-free overdraft of £ 250 as usual.

HSBC

HSBC’s new overdraft rate of 39.9% went into effect as scheduled on March 1, but will bring it back to its previous rate of 19.9% ​​from April 9 to July 9.

HSBC was also the first of the major banks to introduce an interest-free overdraft of £ 500 last week.

    Some banks have temporarily delayed overdraft hikes or introduced rate cuts for the time being
Some banks have temporarily delayed overdraft hikes or introduced rate cuts for the time being

NatWest and RBS

NatWest and RBS, both of which are part of the RBS banking group, delayed the introduction of their interest rate by 39.9%.

This was to take effect in late March or early April depending on your account.

Instead, as of March 30, they have kept rates at their current levels of 14.89% and 19.89%, and will do so until June 30.

The rate you pay depends on the account you have.

Santander

Santander also had to raise rates to 39.9% from today.

But that delayed the increases and instead introduced a new rate of 19.9%, effective from today until July 9.

He also launched an interest-free overdraft of £ 500.

Until today, it charged a daily overdraft fee rather than an interest rate.

TSB

The TSB began charging 39.9% interest on overdrafts starting April 1.

But as of April 8, it will automatically introduce a new temporary interest rate of 19.85%.

In addition, the bank will set up an interest-free overdraft of £ 500 for customers who already have an arranged overdraft – although you must actively request it.

Both measures will be in place until July 8.

The bank previously billed borrowers between 8.21% and 19.84% depending on the account.

Which banks have not delayed or reduced overdraft rates?

At the other end of the scale, Bank of Scotland, Barclays, Halifax, Lloyds Bank, Monzo, Nationwide, Starling and TSB have pushed forward new rates and have yet to announce rate reduction plans.

Bank of Scotland, Halifax and Lloyds Bank

Bank of Scotland, Halifax and Lloyds Bank, all of which are part of the Lloyds Banking Group, began billing users at 27.5%, 39.9% or 49.9% as of today.

The amount you pay will depend on your credit score and the account you have, but Lloyds says he has no plans to cut rates at this time.

This is because he introduced a £ 300 toll free overdraft to temporarily help borrowers in difficulty, which means that all of his clients with an overdraft are now better off.

Previously, Lloyds users paid different rates depending on the size of their overdraft.

How to Reduce Your Overdraft Costs

There are several ways to reduce overdraft fees and the one that is right for you will depend on your situation. Here are some options recommended by MoneySavingExpert:

Spend less every month – make an appropriate budget and watch what you spend.

Could you cut your morning coffee, or put a brand down at the supermarket?

Or, are you paying too much on your bills? If you haven’t changed your energy, insurance and broadband recently, chances are you could save £ 100 or even £ 1,000 a year.

Move your invoices – this can be dangerous if you are not disciplined, but if you move your invoices just before pay day rather than just after, many will be credited (or less in the red) for less than a month, which means that you are charged less for overdraft. But – remember these bills come out, so don’t treat them like you have extra money to spend.

Move a bank account – there are a lot of choices and you can end up saving money.

Transform your overdraft on a money transfer card – and do not reconstitute it.

Try to configure “pots” – sort your money at the beginning of each month, so that you have a money pot, a money pot, etc. Use this technique to make payments on your overdraft, for example £ 100 per month, treating it like any other bill.

Ask for advice – If you are confused, seek advice from a financial expert. Advice to citizens, Step change or The Money Advice Trust will help you all for free.

Monzo

Monzo’s new 19%, 29% and 39% rates went into effect on April 1 – what you pay depends on your credit score.

He has not lowered his rate yet because he says he is helping borrowers by temporarily freezing fees, putting in place repayment plans and not charging non-reimbursed payments.

Previously, overdraft users had to pay daily fees.

At national scale

Nationwide introduced its new 39.9% fee before the curve in November of last year.

He has no plans to cut his rate at this time, and adds that borrowers can request payment deferral while waiting.

Previously, she charged 18.9% interest on her FlexAcc account for an overdraft and daily fees on her other accounts based on the amount of your overdraft.

Starling

Starling began charging 15%, 25% and 35% interest on overdrafts starting April 1 – the amount you pay, again, depends on your credit score.

He says he is still considering FCA proposals.

Previously, it charged a fixed rate of 15% interest.

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