Lloyds make ‘radical’ change to overdraft charges with daily tariff of 1p for every £7 borrowed
Bank says nine in ten customers will be in a better or same financial position following changes introduced this month.
LLOYDS bank have changed the way they charge their customers for going into their overdrafts.
They say 90 per cent of people who bank with them will be in better or the same financial position as they were under the old system.
The new method, starting this month, involves charging savers 1p each day for every £7 they are overdrawn.
The charges will then be collected by the bank on a daily basis rather than at the end of each month.
It works out at an interest rate of 52 per cent if someone is overdrawn by £7 for a whole year.
They are currently the UK's biggest banking group with 20 million current account holders.
The new system means an end to the old method of charging people a monthly usage fee of £6.
Interest wound then be paid at 18.9 per cent each year beyond the threshold amount of £25.
It also spells an end to fees of £5 per day for unarranged borrowing as well as fees for overdrawn amounts.
The bank used to charge £5 per day for amounts between £10 and £25 and £10 for anything beyond that.
The changes mean 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.
Andrew Hagger, of Moneycomms.co.uk, told The Sun Online: "This is a fairly radical move by Lloyds Banking Group and will be welcomed by customers who have, in the past, been hit with high unauthorised charges under the bank’s existing tariff.
"But for those borrowing sums in four figures, the new tariff starts to get more expensive."
Simon Kenyon, of Lloyds, said: "We think this new approach to overdrafts is simple, because it’s a daily rate and no other fees, and clearer because it’s based on how much a customer borrows and for how long."
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