HSBC to hike overdraft fees from March

eskbanker

SnowTiger wrote: »

I'm guessing they'll really charge 39.9% EAR interest plus a £20 monthly fee.

jon81uk wrote: »

Hopefully First Direct don't change significantly.

The current charges at First Direct seem pretty fair to me, £250 interest free then 15.9% on the rest of your arranged overdraft. If you go over the arranged limit its £5 a day (with a £10 buffer).

Easy to work out and offers a good value way to borrow if you really need some extra cash one month on the arranged overdraft and clear charges if you go over the arranged limit.

Just to be clear, the whole reason HSBC (and the others eventually) are doing this is to comply with the new FCA rules, which come into force in April, prohibiting both fixed daily or monthly charges and differential charging between arranged and unarranged overdrafts, so FD's pricing model will have to change too.

https://www.fca.org.uk/news/press-releases/fca-confirms-biggest-shake-up-overdraft-market:

Today the FCA has announced that it is:

• Stopping banks and building societies from charging higher prices for unarranged overdrafts than for arranged overdrafts.
• Banning fixed fees for borrowing through an overdraft – calling an end to fixed daily or monthly charges, and fees for having an overdraft facility.
• Requiring banks and building societies to price overdrafts by a simple annual interest rate.
• Requiring banks and building societies to advertise arranged overdraft prices with an APR to help customers compare them against other products.
• Issuing new guidance to reiterate that refused payment fees should reasonably correspond to the costs of refusing payments.
• Requiring banks and building societies to do more to identify customers who are showing signs of financial strain or are in financial difficulty, and develop and implement a strategy to reduce repeat overdraft use.

SnowTiger

gt94sss2 wrote: »

The £20 is a monthly cap on the total interest charged. HSBC will not be charging a monthly fee

I see lots of talk about a 40% interest charge. Others seem to have missed there's a monthly cap of £20.

The BBC doesn't mentioned the cap at all.

Maximum annual charge for an arranged or unarranged overdraft with HSBC will be £240 a year.

Who's likely to lose out? Punters who use an arranged overdraft of less than £600, it appears their charges will double.

Saint Martin Lewis, editor of MSE: 'After 10 years there's finally an end to unfair bank charges'.

Highland76

born_again wrote: »

Given FD are part of HSBC it won't be long and they will be the same %.
.

If that's true then I hope they keep their free £250 overdraft buffer in place :T

eskbanker

SnowTiger wrote: »

I see lots of talk about a 40% interest charge. Others seem to have missed there's a monthly cap of £20.

The BBC doesn't mentioned the cap at all.

Maximum annual charge for an arranged or unarranged overdraft with HSBC will be £240 a year.

The monthly cap only applies to unarranged overdraft charges, so there will be the charges for the arranged portion on top of these (except for those whose arranged overdraft happens to coincide with the small fee-free component).

eskbanker

Yorkshire_Pud wrote: »

Does that mean those who go overdrawn with an 100% unnaranged OD will be better off than those with an arranged overdraft? Doesn't sound right!?

Possibly, mathematically, but it depends on what changes they intend to make regarding transaction authorisation.

When Nationwide announced their changes, they made it explicitly clear that they're planning to impose greater control on authorisations and will decline more frequently, in order to prevent accounts from going into unarranged overdraft.

Seems entirely plausible to me that HSBC may have the same sort of idea in mind, even if they don't feel the need to announce it, as banks have always specified that allowing accounts to enter unarranged overdraft is at their discretion....

Yorkshire_Pud

I got an email from HSBC about the new charges and its £20 monthly fee for those using an un-arranged OD (instead of £5 a day!) PLUS 39.9% interest so its not capped at £20 a month all in or people could just go overdrawn by thousands and only pay £20 fee!

So if my understanding is correct all overdrawn funds incur a 39.9% interest charge but if any of that amount is un-arranged an additional monthly fee of £20 is charged (and presumably rolled over along with the interest month on month until paid off).

Scary. And Martin thinks this is an improvement, maybe it is!?

PS deleted my previous post eskbanker after reading up but strangely it still kind of makes sense!

eskbanker

Yorkshire_Pud wrote: »

I got an email from HSBC about the new charges and its £20 monthly fee for those using an un-arranged OD (instead of £5 a day!) PLUS 39.9% interest so its not capped at £20 a month all in or people could just go overdrawn by thousands and only pay £20 fee!

PS deleted my previous post eskbanker after reading up but strangely it still kind of makes sense!

Can you copy/paste the relevant text from the email, as it contradicts what's stated in the link SnowTiger posted?

Yorkshire_Pud wrote: »

So if my understanding is correct all overdrawn funds incur a 39.9% interest charge but if any of that amount is un-arranged an additional monthly fee of £20 is charged (and presumably rolled over along with the interest month on month until paid off).

I don't believe your understanding is correct!

The new charges effectively split into three chunks:

First £25 - now free for most of their accounts

£25 up to arranged limit - 39.9% EAR

Anything over arranged limit - 39.9% EAR, capped at £20/month (it's a cap, not a fixed fee)

Blackbeard_of_Perranporth

I'll just check mes cards of credit and my overdraft fees for the last umpteen years!
£0
There, if you borrow, you pay!

Yorkshire_Pud

eskbanker wrote: »

Can you copy/paste the relevant text from the email, as it contradicts what's stated in the link SnowTiger posted?

Not able to but if you google : 'HSBC We're making changes to our overdrafts', the document is there:)

eskbanker

Yorkshire_Pud wrote: »

Not able to but if you google : 'HSBC We're making changes to our overdrafts', the document is there:)

The only document I can find is the one SnowTiger linked at post #8, which I've just summarised in post #18 - it doesn't say anything about a £20 fee plus interest....