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Nationwide BS, how about 40% EAR/APR Overdraft Charges?
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[Deleted User]
Posts: 0 Newbie


:eek: We’re changing how we charge for arranged overdrafts.
From 11 November 2019, instead of charging you the existing arranged overdraft interest rate of 18.9% EAR (variable) on the amount you’re borrowing, we’ll be charging 39.9% EAR/APR (variable) on all new and existing borrowing. So, whether you have a FlexDirect, FlexPlus or FlexAccount, there’ll be a single overdraft rate on all arranged borrowing; making things clearer and easier to understand.
If you take out an arranged overdraft before 11 November 2019, you’ll be charged 18.9% EAR (variable) until this date. After that, the new rate will apply.
BB Code Editor
From 11 November 2019, instead of charging you the existing arranged overdraft interest rate of 18.9% EAR (variable) on the amount you’re borrowing, we’ll be charging 39.9% EAR/APR (variable) on all new and existing borrowing. So, whether you have a FlexDirect, FlexPlus or FlexAccount, there’ll be a single overdraft rate on all arranged borrowing; making things clearer and easier to understand.
If you take out an arranged overdraft before 11 November 2019, you’ll be charged 18.9% EAR (variable) until this date. After that, the new rate will apply.
BB Code Editor
Are free unauthorized overdrafts a moral hazard 27 votes
Yes
37%
10 votes
No
62%
17 votes
0
Comments
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I'm a bit confused, the poll is for free unauthorized (assume you meant unarranged?) overdraft and the post is about paid arranged overdraft.
What is the point?0 -
Another inane poll post0
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Was the the banking crisis of 2008 inane? Perhaps there were too many people like you who never really understood the term 'Moral Hazard' as it applies to people who use banks.0
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[Deleted User] wrote:If you want to bank with someone and you have a poor credit history and no arranged overdraft sign up with NW and they won't charge you a fee if you go overdrawn. Click the link to find out more.
They're not offering free unarranged overdrafts, they're saying that they're now going to be taking active steps to prevent accounts going overdrawn if there's no arranged facility, unless in exceptional circumstances, as per https://www.nationwide.co.uk/-/media/MainSite/documents/products/current-accounts/flexaccount/P3749-FlexAccount-summary-of-changes.pdf:Removal of unarranged overdrafts and the paid and unpaid transaction fees
An unarranged overdraft is where we may cover a payment, even if you haven’t got enough money in your account or an arranged overdraft with us. In the past, we’d have covered these payments – but to help reduce unexpected fees, they will no longer normally be paid.
[...]
Except for a few special circumstances, you won’t be able to go into an unarranged overdraft now. The rare occasions where this might still happen are:
• if we can’t, for any reason, stop a payment you’ve made, or
• if a payment into your account is recalled by the bank making it, or
• if a cheque paid into your account is later returned unpaid, or
• if we apply charges to your account.0 -
Perhaps you're misunderstanding what Nationwide are actually saying?...
You linked FlexAccount Summary of ChangesRemoval of unarranged overdrafts and the paid and unpaid transaction fees - Page 2
An unarranged overdraft is where we may cover a payment, even if you haven’t got enough money in your account or an arranged overdraft with us. In the past, we’d have covered these payments – but to help reduce unexpected fees, they will no longer normally be paid.
There are some cases where you may still go into an unarranged overdraft (which we explain on page 3) – but if this ever happens, as of 11 November 2019, you’ll no longer be charged the £5 paid transaction fee. You’ll just need to pay back the amount as soon as possible, and you won’t be able to take out money from your account until you have done this.
We’ll also be removing the £5 unpaid transaction fee – which you’d normally receive if a scheduled payment, like a direct debit for example, doesn’t go through because there isn’t enough money in your account to cover it.
If you don’t currently have an arranged overdraft in place but would like to see if you can get one now that unarranged overdrafts are no longer available on your account, you can find out how to apply by taking a look at the ‘Your questions answered’ section on page 6.Your Questions Answered - Page 3
If I reach a zero balance or the limit of my arranged overdraft and find myself in an unarranged position and unable to make any payments, what do I need to do?
From 11 November 2019, to carry on using your current account, you’ll need to either:
a) Bring your balance out of an unarranged position – either within your arranged limit or above £0.00 if you don’t have an arranged limit.
b) Review your arranged overdraft limit to better suit your borrowing needs. To find out more, see the question ‘How do I apply for an arranged overdraft or change my existing limit?’.
If you don’t feel able to do the above, then please get in touch and we’ll try to help. You may also find useful information at nationwide.co.uk/money0 -
I went online and used their calculator. If I were to use the £5000 overdraft facility it would cost me £15 a month until the impending change. After that it would cost me £144. This is the Flex direct account.
Fortunately its not something I use very much but for someone who draws on it regularly it certainly makes a big difference.0 -
[Deleted User] wrote:What's not clear and for example: if the arranged overdraft is £250 and you go over, how much will they allow you to go over because this is attracts interest at 39.9% APR. Similarly, for an unarranged overdraft what amount will they allow you to go over by.[Deleted User] wrote:Is this borrowing rate competitive or is it excessive in terms of short term borrowing.0
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I went online and used their calculator. If I were to use the £5000 overdraft facility it would cost me £15 a month until the impending change. After that it would cost me £144. This is the Flex direct account. Fortunately its not something I use very much but for someone who draws on it regularly it certainly makes a big difference.
This is a funded budget as opposed to the unfunded budgets that most people use. When there is a surplus the budget can be drawn down and the money used elsewhere. Key to successful money management is a regular monthly income. Alas, for all too many income comes in at varying times of the month and when it arrives it is never enough. People then apply for short loans (charity) from the bank of Mum & Dad or family and friends.
Mum knows that her energy bill is due by direct debit. NW uses its discretion and allows the debit to take place even though there is not enough money in the account to cover it. She becomes overdrawn by £90. All of her other direct debits are refused. Each time this happens no admin fee is payable but the £90 attracts interest at 39.9% APR with no prospect of repayment.
The banking crisis built up slowly and revealed itself in 2008. The world of money in my view is divided into halves. Those that have a regular income at a fixed time of the month (the salaried) and others whose income varies across the month (the self-employed). Because of the way that the state pays out welfare those who enjoy its benefits fall into the class of the self-employed. This avoids the politics of saying that welfare recipients are salaried.
The term 'Moral Hazard' in its technical sense relates to the risks that Banks take on. If the banking sector was to do what NW is doing then a stress test of the bank would be needed to determine whether the bank has enough assets to cover the increased risk. Has NW a mutual, funded the risk by lowering the interest payable on its savings accounts?
Just what is the banking sector to do?0 -
[Deleted User] wrote:Mum knows that her energy bill is due by direct debit. NW uses its discretion and allows the debit to take place even though there is not enough money in the account to cover it. She becomes overdrawn by £90. All of her other direct debits are refused. Each time this happens no admin fee is payable but the £90 attracts interest at 39.9% APR with no prospect of repayment.[Deleted User] wrote:The term 'Moral Hazard' in its technical sense relates to the risks that Banks take on. If the banking sector was to do what NW is doing then a stress test of the bank would be needed to determine whether the bank has enough assets to cover the increased risk. Has NW a mutual, funded the risk by lowering the interest payable on its savings accounts?
Just what is the banking sector to do?0
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