Halifax, Bank of Scotland and Lloyds bank announce massive overdraft shake-up which will hit MILLIONS of customers
From November, customers will be charged a single rate of 1p per day for every £7 of overdraft use
MILLIONS of Halifax, Bank of Scotland and Lloyds Bank customers could be forced further into the red due to a massive shake-up to overdraft charges.
Those with the biggest arranged overdrafts who are constantly in debt will be the worst hit by the overhaul.
Customers who hardly ever dip into their safety net with the bank will be better off.
At present, customers are charged a £6 fee plus interest, depending on their account.
From November, customers will be charged a single rate of 1p per day for every £7 of overdraft use.
Instead of taking the money at the end of the month, the banks will charge a daily fee.
It will no longer charge customers if they go over their arranged overdraft limit, although customers will be expected to repay any money they owe as would be expected.
For example, this means that a customer who goes overdrawn by £100 within their planned allowance for 10 days, will pay £1.40, whereas previously they would have paid £6.38.
But for a Lloyds Bank customer who is in their overdraft by £2,000 for more 12 days a month will pay £34.29 - an increase of £16.82 a month or £201.84 per year.
While a Halifax Reward customer will pay £34.29 - an increase of £10.29 per month or £123.48 per year.
Lloyds Banking group say that 90 per cent of customers will see no change or will be better off and that around half of customers have an average overdraft of £450.
“I will be over £200 a year worse off - it’s very frustrating”
LOCAL newspaper journalist Harriet Orrell has been trying to pay off her £2,000 overdraft since she graduated in 2013.
The 26-year-old, who lives in Norwich, will be more than £200 a year worse off under the changes.
She said: “When I get paid I clear my overdraft but by the end of the month I have built it up again. It’s very frustrating.
“I appreciate that this gives people an incentive to pay it off but I’m not in the financial position to do so.
“It’s terrifying to think that it will be constantly trickling out but it might be kick I need to try harder”.
Customers will be contacted by letter and email about the changes.
Those who will be negatively impacted will receive an invitation for extra advice, including whether they can take out a personal loan to help pay off the debt.
Those with the biggest debts, who are consistently in their overdraft will be the worst hit.
Savings expert, Andrew Hagger, founder of Moneycomms.co.uk, said: “This is a fairly radical move by Lloyds Banking Group (LBG).
"The effective interest rate charged will jump up from around 19 per cent to over 50 per cent so for customers struggling to clear a stubborn overdraft balance it's going to be far from easy to make a decent inroad into the amount owed.
For customers struggling to clear a stubborn overdraft balance it's going to be far from easy to make a decent inroad into the amount owed
Andrew Hagger, Moneycomms.co.uk
"If your overdraft is solid and you're getting nowhere fast it may be worth looking at a 0 per cent money transfer credit card from the likes of MBNA or Virgin Money - it's far more cost effective especially if you repay the balance before the 0 per cent term ends."
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