Beware First direct 250 interest free

sjw3915

Not sure if I have posted this in the right place but just a warning about First Direct's "£250 completely free interest free overdraft" This doesn't mean that it is without any charges. Unless you have "a formal overdraft facility" as they call it, although there will be no interest up to £250, you will still be charged 25 pounds everytime time you use it. That is £25 for every transaction! I was charged £125 for using this completely free overdraft! I believe their website is unclear about this and this detail should be more prominent. Most people are given formal overdraft facilities at the time of account opening but not all. I didn't get one because I already have an overdraft facility with them on another account. By the way, they say they charge £25 for setting up a formal overdraft, but if you are opening an account, say you want it for free and they will often give it. They did eventually refund my charges after I made 3 phone calls and they listened to a recording of my call when I opened the account. They said it wasn't properly explained to me. :undecided

noh

Could hardly be clearer.
From their website

"We offer a completely interest free £250 overdraft for all new 1st Account customers, to help you manage your money. Overdrafts above £250 will be charged"

You were an existing customer so were not offered the interest free overdraft on your new account.
You were charged £25 each time you used an unautourised overdraft as per their price list.

sjw3915

I'm not sure you've got the point. The statement:

"We offer a completely interest free £250 overdraft for all new 1st Account customers, to help you manage your money.
doesn't mean that it is free. It means it is INTEREST free.
The phrase " Overdrafts above £250 will be charged" relates to the INTEREST that will be charged.
As was pointed out to me by First Direct I actually did have a 250 pounds interest free overdraft because it was a new sole account for me. And this was true, they didnt charge me any interest on the first 250 pounds. But they did charge me 25 pounds for each transaction because the overdraft itself isn't free. When opening an account you need to make sure that as well as the interest free part of the overdraft, you also have a "formal overdraft facility" which will allow you to operate the overdraft interest free AND CHARGE FREE.
It is this that I am warning people against. This has been explained to me very clearly in e mails. As I said any person reading that statement would assume that when you have an interest free overdraft facility, you don't pay for it. They do explain about a formal overdraft faciltiy, but only as a postscript. In their terms and conditions, if you want any overdraft facility they axplain that you have to pay av 25 pounds set up fee. Clearly a completely interest free 250 pounds overdraft isn't as appealing as it first sounds and it is this that I am warning people against

noh

I haven't missed the point.
You were not a new customer so why did you assume you had the overdraft facility?
The first £250 of debit interest is charged at 0% for all 1st Account customers.

http://www1.firstdirect.com/content_static/pdf/rates_charges.pdf

If your post was made to highlight the dangers of making assumptions then it is a valid point.

However First Directs website is clear.

sjw3915

For the record I didn't make an assumption. All phone calls are recorded and after listening to the call they agreed I had been misinformed even though I asked specific questions related to charges. My charges were refunded. You're still missing the point...
You were not a new customer so why did you assume you had the overdraft facility?
I did have the overdraft facility as I said in my previous post. This was confirmed by First Direct

All new customers do indeed get a 250 pounds interest free overdraft. They gave one to me even though it was my second account with them. The catch is if you use it you have to pay for it and it costs £25 pounds for every single transaction!!!
The completely interest free £250 overdraft facility is in fact not an authorised overdraft!!!!(or formal overdraft as they term it) And this is what most peopl would find confusing.
First direct are very keen to emblazen the interest free part of a 250 overdraft on their website but less clear to explain that all new customers have to actually pay an arrangement fee to have a formal overdraft facility and so avoid paying fees on it. Even if you are a new customer, if you don't pay an arrangement fee of £25 to arrange a formal overdraft you have to pay every time you use it even if you keep within £250 limit. The only fee you will avoid is a few quid interest.

sjw3915

The catch is if you use it you have to pay for it and it costs £25 pounds for every single transaction!!!
That should read if you use it more than once you pay for every transaction!

meer53

If you have an agreed formal overdraft on your account, using that overdraft facility does not cost (apart from interest obviously) unless you exceed the agreed limit. If this is your second account then a £25 arrangement fee will apply for any overdraft agreed on this account. If you exceed that limit,THEN you would be charged £25 per transaction. You won't be charged £25 for EVERY transaction that debits your account within that limit.


You could have exceeded your limit 5 times to incur fees of £125. Or 4 times plus an arrangement fee (dependant on the amount of the transactions). Transactions over £25 are charged £25, up to £25 are charged £10 and up to £10, no charge is applied. This is fully detailed in their T & C's.

It sounds as though you had a second account without an agreed formal overdraft facility on it. You did say in your OP that you didn't get the overdraft as you already had an account with them, were your charges on the second account ? The one WITHOUT the overdraft ?

sjw3915

It sounds as though you had a second account without an agreed formal overdraft facility on it.
That's exactly right. I didn't have a formal overdraft facility although i was led to believe I did, hence First Direct to their credit did refund me the charges (even though it did take me 3 phone calls before they listened to a tape of my original phonecall)
The point to my original thread is that their phrase
We offer a completely interest free £250 overdraft for all new 1st Account customers does not mean you have formal overdraft facilities. I believe that many people would assume on reading this that you could go 250 pounds overdrawn without any charges. This of course isn't the case. If you use this £250 overdraft more than once in a month you will be charged every time you use it even if you stay below £250. If you want an overdraft that you don't pay per transaction to use, you have to pay to arrange formal overdraft facilities.
What does the interest amount to per month on £250? A few quid at most probably. They make a headline out of this saving but far less (a point on an asterix) of the fees involved. I appreciate they need to advertise, but I think they could communicate their charges more clearly.

wayborn

After reading the OP I was confused and slightly worried having just taken out a Joint account with First Direct yesterday (my first and only account with them) so I called them to clarify. As explained to me, you only pay interest on anything above the £250. You do not get charged £25 per transaction or an activation fee, obvioulsy if you go above your agreed limit then you would incur a charge of £25 each time money came out of your account which you would expect. We have a joint account so our limit is £500 but we would still incur interest only if we go above £250 as stated when applying.

Sorry for repeating what others have stated but I thought it would reassure anyone else who may have recently joined or are thinking about joining First direct. May I also state that their customer service was out of this world and it was such a pleasure to not only get through to an advisor right away (no automated systems or being put on hold for ages!) but to also get through to someone from this country instead of being sent half way round the world.

sjw3915

Please see below an extract of the email they sent me.

"To clarify, all 1st Accounts benefit from a £250 interest free element, even those without a formal facility. Any balance over £250 debit incurs debit interest. However, any formal facility or informal increase costs £25. I would like to further clarify that all formal facilities incur a £25 Arrangement Fee, even with new accounts. If a customer does not request an alternative amount, and we are happy to agree the facility, then new accounts receive a £500 formal limit. Even so, this facility incurs a £25 Arrangement Fee when the account is opened.

meer53

sjw3915 wrote: »

It sounds as though you had a second account without an agreed formal overdraft facility on it.
That's exactly right. I didn't have a formal overdraft facility although i was led to believe I did, hence First Direct to their credit did refund me the charges (even though it did take me 3 phone calls before they listened to a tape of my original phonecall)
The point to my original thread is that their phrase
We offer a completely interest free £250 overdraft for all new 1st Account customers does not mean you have formal overdraft facilities. I believe that many people would assume on reading this that you could go 250 pounds overdrawn without any charges. This of course isn't the case. If you use this £250 overdraft more than once in a month you will be charged every time you use it even if you stay below £250. If you want an overdraft that you don't pay per transaction to use, you have to pay to arrange formal overdraft facilities.
What does the interest amount to per month on £250? A few quid at most probably. They make a headline out of this saving but far less (a point on an asterix) of the fees involved. I appreciate they need to advertise, but I think they could communicate their charges more clearly.

It is a formal overdraft ie, it's set up on the account. You can go up to £250 overdrawn without incurring any charges. You don't incur charges if you use it more than once in any month.

If you have a second account and need an overdraft, you need to request this. Once this formal overdraft is agreed (a fee of £25 applies) you can also use this to go up to £250 without incurring any fees.

What happened to you is that you made payments on an account WITHOUT an agreed overdraft and you incurred charges for this. This is called requesting an INFORMAL overdraft. It means that your bank will agree to make payments for you when you haven't agreed an overdraft facility in advance. You only incur fees per transaction if there is no overdraft on the account and no available credit to pay them.

As you now have 2 accounts with overdrafts on both, you won't be paying any more transaction fees.