Changes to Bank Overdrafts

What are the new rules?

There are three main changes being introduced which will affect your overdraft.

 

·       Interest on all overdrafts will be charged at a single annual interest rate (APR).

·       No daily or monthly fees for using your overdraft.

·       The same interest rate for arranged and unarranged overdrafts.

 

This means you might lose your interest-free overdraft and overdraft buffer.

However, to be sure, you will need to check with your bank.

 

Not all banks and building societies have announced what their interest rates will be. However, the ones which have already announced the changes, are charging between 15% and 40%.

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How will the new rules affect my overdraft?

You will no longer have to pay daily and monthly fixed fees means it might not necessarily be more expensive if you only occasionally use your overdraft facility.

But if you find yourself in your overdraft for most of the month, then it’s likely these changes will cost you more.

 

If you are worried or unsure about the changes, then you should:

 

·       Speak to your bank or building society as soon as possible.

·       If you feel vulnerable for any reason, explain your circumstances and your provider is obliged to be take this into consideration.

·       If these changes to overdrafts result in struggling to pay your bills or fall into debt, or you are already in debt, you should contact Debt Action as soon as possible

 

 

Overdrafts are useful for unexpected expenses however an overdraft is a form of credit.  If you use money from the overdraft this is in a sense a form of a loan from the bank, and it has to be repaid.  If you are dependent on the overdraft facility each month by using the limit set to supplement your income you may need to seek advice to help you get your finances on track.