HSBC to hike arranged overdraft fees up to 40% from 10% from March
MILLIONS of HSBC customers will see overdraft charges hiked by up to 39.9 per cent from March 2020, although the bank is removing pricey daily fees for going into the red.
Exactly how you'll be affected depends on which current account you have with HSBC - we've rounded up a full list of individual changes below.
But everyone will be moved to a new, flat-rate interest charge of 39.9 per cent for dipping into both arranged and unarranged overdrafts.
This will see those dipping into arranged overdrafts pay more each time.
But if you constantly go into the red of an unarranged overdraft, the overall amount you can be charged each month will fall to £20.
In addition, HSBC is scrapping daily overdraft fees for everyone, and introducing an interest free £25 buffer for arranged overdrafts on its bank account and advance bank account.
How to cut your overdraft costs
THERE are a few ways to cut overdraft costs, and which suits you will depend on your situation. Here are a few options advised by MoneySavingExpert:
Spend less each month – do a proper budget and have a look at what you’re spending on.
Could you cut your morning coffee, or go down a brand at the supermarket?
Or, are you paying too much on your bills – if you haven’t switched energy, insurance and broadband recently, then it’s likely you could save £100s or even £1,000s over a year.
Move your bills – this can be dangerous if you’re not disciplined, but if you move your bills to just before payday rather than just after, many will be in credit (or less in the red) for less of the month, meaning you’re charged less for the overdraft. But – remember those bills are coming out, so don’t treat it like you’ve extra money to spend.
Shift your overdraft on to a money transfer card – and don’t build it back up again.
Try setting up "pots" - sort your cash at the start of each month, so you have a bills pot, a spending pot etc. Use this technique to make payments to your overdraft, eg £100 a month, treating it like any other bill.
The bank wouldn't tell us how many customers are affected but it has millions of users with an overdraft.
It reckons seven in ten customers who use an overdraft will either be better off or will pay the same.
HSBC's shake-up comes amid new rules being introduced from April 6 by the Financial Conduct Authority (FCA) that will see banks banned from charging rip-off overdraft fees, although they can still charge interest.
The much-needed crackdown comes after The Sun reported how borrowers are being charged more interest by banks for unauthorised overdrafts than if they took out a payday loan.
"Fortunately, though, there are still banks out there, such as First Direct and Starling, offering lower overdraft rates.
"If you're hit by HSBC's changes, see if you can switch to an account with a cheaper overdraft."
What's happening?
Here's what's changing by account.
Bank account, graduate bank account, current account (off sale)
- Currently: You're charged 19.9 per cent for arranged overdrafts, £5 a day for unarranged overdrafts and charges are capped at £80 a month.
- New system: On the bank account, there will be no charges for the first £25 of an arranged overdraft. You're charged 39.9 per for arranged and unarranged overdrafts. Unarranged charges will be capped at £20 a month. There's no cap for arranged overdrafts.
HSBC advance bank account
- Currently: You're charged 17.9 per cent for arranged overdrafts, £5 a day for unarranged overdrafts and charges are capped at £80 a month.
- New system: There will be no charges for the first £25 of an arranged overdraft. After this, you're charged 39.9 per cent for arranged and unarranged overdrafts. Unarranged charges are capped at £20 a month. There's no cap for arranged overdrafts.
HSBC premier bank account
- Currently: You're charged 11.9 per cent for arranged and unarranged overdrafts with a £500 a monthly cap on charges.
- New system: There will be a £500 interest-free arranged buffer, after this, you'll be charged 39.9 per cent for arranged and unarranged overdrafts. Unarranged charges are capped at £20 a month. There's no cap for arranged overdrafts.
HSBC Jade
- Currently: You pay 9.9 per cent for arranged and unarranged overdrafts with a £2,000 cap on monthly charges.
- New system: There will be a £1,000 interest-free buffer, after this, you'll be charged 39.9 per cent for arranged and unarranged overdrafts. Unarranged fees are capped at £20 a month. There's no cap for arranged overdrafts.
HSBC's student account has an interest-free overdraft, while basic bank accounts don't have an overdraft so customers of these accounts are unaffected.
The bank doesn't charge fixed fees or returned item fees, which happen when providers try and take payments, direct debits or standings orders from overdrawn accounts, and there's no change here.
Madhu Kejriwal, HSBC UK’s head of lending and payments said: “By simplifying our overdraft charging structure we are making them easier to understand, more transparent and giving customers tools to help them make better financial decisions.”
But HSBC isn't the only provider to reveal overdraft hikes.
Nationwide upped overdraft fees by up to £73 a year for millions in November.
While Lloyds was slammed in January for making overdraft fees more expensive.