Will you pay more under the new rules on overdrafts?


Bank customers will no longer be shown overdrafts included in their “available funds” as part of a raft of changes effective from today
The Financial Conduct Authority (FCA), the City watchdog, announced in the summer it would force banks to reform the way they approach both arranged and unarranged overdrafts. 

From today, banks will have to do more to highlight customers at risk of financial stress through repeat overdraft use. They must provide digital tools to make it easier for customers to compare costs and calculators to help translate interest rates in pounds and pence.

From April 1, banks will not be able to charge more for unarranged overdrafts than for arranged overdrafts. They will also be banned from charging fixed fees on accounts instead of an annual interest rate.

Some concerns have been raised that the move to percentage-based fees could make things more confusing or could even make some banks' overdraft fees more expensive. 

Earlier this month, HSBC announced it would increase its arranged overdraft fees to almost 40pc in line with the forthcoming rules.

Analysis by Fairmoney.com showed that the bank’s rates on personal loans currently range from 3.3pc to 16.9pc, meaning a borrower could pay 10 times more for an overdraft.

Roger Gewolb, from the firm, said: “It would be totally unsurprising if the other banks now followed in the same direction. 

“Our research shows 10.5 million people are in the worst financial state of their lives. This is a clear indication that the banks are out of touch with the very serious financial situation millions find themselves in.”

Nationwide Building Society also introduced a 39.9pc charge across all its current accounts last year.

The FCA said it expected the typical cost of borrowing £100 through an unarranged overdraft to drop from £5 a day to less than 20p a day.