MSE News: Reaction to Halifax's changes

VerySimpleOne

HBOS promotes its new standard overdraft conditions as "overdrafts made easy" and 0% EAR (equivalent annual rate), which sounds so good, but as the article says, if you become overdrawn by £10, this corresponds to an EAR of 3650%! As you become more overdrawn the equivalent EAR drops, but even at £1000 the charge corresponds to 36.5% EAR. EAR was introduced as a measure to protect consumers and allow them to compare how much loans were costing. HBOS is disguising huge charges in the name of simplicity, while using the 0% EAR to promote its account! Other banks may follow suit, so it is vital that legislation is introduced to expose the costs. I think an equivalent annual cost or EAC should be introduced, so that for £1 to £2500 borrowed HBOS’ account would have an EAC of £365.
Thanks to HBOS for introducing this on 6th December just before Christmas!

opinions4u

VerySimpleOne wrote: »

HBOS promotes its new standard overdraft conditions as "overdrafts made easy" and 0% EAR (equivalent annual rate), which sounds so good, but as the article says, if you become overdrawn by £10, this corresponds to an EAR of 3650%!

Solution being "don't go overdrawn by small amounts".

EAR was introduced as a measure to protect consumers and allow them to compare how much loans were costing.

It doesn't work. I'd hazard a guess that less than 20% know what it stands for and fewer realise its purpose.

HBOS is disguising huge charges in the name of simplicity

They're not disguising anything. It is simple and clear. For many overdrawn customers it is also expensive. At least they can quickly work out how expensive and take action to avoid being overdrawn.

while using the 0% EAR to promote its account!

If they didn't quote the EAR like this they would be breaking FSA regulations.

Other banks may follow suit, so it is vital that legislation is introduced to expose the costs. I think an equivalent annual cost or EAC should be introduced, so that for £1 to £2500 borrowed HBOS’ account would have an EAC of £365.

Something that enables consumers to compare like with like is a sensible idea. It doesn't need legislation - the FSA can demand it of those that they regulate.

Thanks to HBOS for introducing this on 6th December just before Christmas!

That's good news. They won't debit the first charges until January!

Welcome to the board.

michaels

AS long as it supports them continuing to pay my wife and I 420 pa between us for 5 mins xfering 1k between 7 accounts each month then I'm all for it...

winter09

Hi I am new to this (so I hope I get it right), I just want to say I bank with BOS and use my £1000 overdraft in full every month. My salary goes into my account(>£1000 and pays all my household d/d), I don't want to be charged £30 a month so I intend to contact all the Companies I pay and ask to change dates of my d/d to the 19th of every month (I get paid on the 20th so if it works I will only pay £1 for using my overdraft).

I plan to upgrade my a/c (old style current a/c) to reward or possibly ultimate reward, but I wondered if the bank do an additional credit check when changing?

jambosans

winter09 wrote: »

I plan to upgrade my a/c (old style current a/c) to reward or possibly ultimate reward, but I wondered if the bank do an additional credit check when changing?

No, they simply change the name and some features.

dooie

I have a £1800 overdraft with halifax and I would love to get rid of this or move somewhere else. Do you think it is better to get a loan out and repay that way or to move the overdraft to a bank with lower charges like A&L? Im also worried that with my overdraft being so big other banks wouldn't let me open an account.
Any advice would be greatly appreciated!

marcharrison1979

Well that's me, i'm finished with the Halifax and taking my business elsewhere, got £100 for moving and it's so easy to do, the other bank has taken care of everything for me. Transfered all my direct debits/standing orders, contacted my work so that my wage gets directed to them instead and they have matched the overdraft I had with Halifax for free. They even closed my Halifax account for me, now all I need to do close my savings and credit card accounts and we're done, never to return again. Oh yeah! I almost forgot about the email I need to send to everyone on my contacts list warning them to never get involved with the Halifax and telling them to warn all of their friends. Hopefully that will spread like wildfire and the Halifax will the new Bearings Bank. So-long suckers!

apt

dooie wrote: »

I have a £1800 overdraft with halifax and I would love to get rid of this or move somewhere else. Do you think it is better to get a loan out and repay that way or to move the overdraft to a bank with lower charges like A&L? Im also worried that with my overdraft being so big other banks wouldn't let me open an account.
Any advice would be greatly appreciated!

Providing you also qualify for the £5 per month reward then the annual cost of a £1800 overdraft is £305 i.e. about 17% which is not out of line with most banks. A&L would be cheaper, but they only match overdrafts in certain circumstances. A loan would also be cheaper in most circumstances, but you need to make sure you can pay off the capitial as well as the interest.

realshannon

I am like dooie, its all well and good if you are lucky enough to be able to move and repay the overdraft just like that but what about the overdraft if you cant? Cant take the risk of them askin for it to be paid on demand, we use 2 accounts and bounce money between them. I am very good with money thanks but we have had a terrible 3 years including redundancy, then losing a business start up through no fault of our own, numerous small claims because of this, a serious RTC and out of pocket expenses that still havent been paid so my message is dont judge everyone, we all have different stories of how we got to where we are financially. Ours will get resolved and we are coming out of the black hole but it is depressing and this is just another small slide down the ladder but when we are able to pay it off Halifax will be brown bread but we will just have to continue to be clever and avoid as much of the fees as we can. Still scratching my head to work out how but where there is a will, there is a way!

rb10

marcharrison1979 wrote: »

Oh yeah! I almost forgot about the email I need to send to everyone on my contacts list warning them to never get involved with the Halifax and telling them to warn all of their friends. Hopefully that will spread like wildfire and the Halifax will the new Bearings Bank. So-long suckers!

What an odd post...

Your friends may think that you are ever so slightly strange for doing that.

Do you reckon I should send an email to everyone I know warning them never to deal with Sainsbury's again. After all, they put up the price of Baked Beans by 10p last week. That really isn't on, a company changing the way it charges for goods or services.

marcharrison1979 wrote: »

They even closed my Halifax account for me, now all I need to do close my savings and credit card accounts and we're done, never to return again.

Did it ever occur to you that it might be better to pay off the overdraft with the savings? That way, you can pay zilch in overdraft interest, and benefit from the whole of the £5 Reward from Halifax.

I somehow think that you're not entirely for real...