HSBC to increase overdraft rate to 39.9%

eskbanker

TheOutlineKid wrote: »

Putting the rate up to 40% is a disgusting thing to do. Other banks are already happily following along. The government first give a sh*t about this as usual.

Not quite sure what your last sentence is actually supposed to mean but maybe worth noting that it's the FCA, a government agency, that's precipitated this move by insisting that banks move to an interest-only charging structure rather than the current mishmash of daily fees and other fixed costs (as well as interest), so it was always predictable that interest rates would rise, hence the post below from six months ago. Perhaps also worth noting that the FCA's example of borrowing £100 at 20p/day translates into an annualised interest rate of about 70% so arguably this is exactly the result the government expected....

eskbanker wrote: »

The Guardian's sub-editors are being a tad disingenuous with that choice of headline - the regulator isn't banning high overdraft fees!

The regulator is banning the use of differential rates between arranged and unarranged overdrafts but stops short of actually imposing any sort of price cap, so there's nothing in these new measures that prevents harmonisation to the higher rate rather than the lower one.

Likewise, banning per-day charges and fixed fees for having a facility don't directly mean a cost reduction, if banks choose to wrap up such costs into higher APRs, so the FCA measures are all about how overdraft costs are structured and presented rather than their overall level.

It's not unreasonable to anticipate that market forces will take effect to prevent banks from stepping significantly out of line with their competitors, but that's not the same as regulator action keeping fees down, so it's not clear to me the basis on which the FCA chief executive claims "Following our changes we expect the typical cost of borrowing £100 through an unarranged overdraft to drop from £5 a day to less than 20 pence a day".

https://www.fca.org.uk/news/press-releases/fca-confirms-biggest-shake-up-overdraft-market has the unspun version of the story....

Takmon

TheOutlineKid wrote: »

Some of these comments are just appalling Ok, so you guys are content in your smug, self-righteous little no-overdraft worlds but this is really going to hit a lot of people who simply struggle to pay their bills.

Not because they are buying luxuries, but because it is physically impossible to make ends meet with the resources that they have. For these folk it is not a situation of their own making.

Whenever I have spoken to people who say they can't make ends meet and i have offered to help and ask for their budget showing their income and outgoings they never have one!. They simply claim they have no money but make no effort to budget at all.

If someone is genuinely earning less than all their bills are they will be bowrrong more each month to pay and the debt will be ever increasing. This is an extremely bad situation to be in and they need to sort it ASAP. But most of the time they haven't even bothered to sit down and come up with a budget. So if they can't even do this why should people sympathise with them when they make no effort.

You also don't fully understand the changes because changing to a fixed percentage is a fairer system and will be cheaper for alot of people who are bad at managing their money, so it actually helps them.

System

Some people are just hapless with money.

I have a friend who I've tried to help their finances (switch providers, change bank account types etc) on a number of occasions. Helped them to convert their bank account to one with no declined payment charges a few months ago and I've just got them to agree to move to sim only as their minimum phone term is ending.

Sharon87

Natwest are worse. they charge £6 each month plus 19.9% interest, so if you go into it by £10 for a day, it costs over £6. I've had this happen to me when something unexpected left my bank account. Thinking of changing from them soon.

Is HSBC Advance overdraft interest rate changing too? As it's lower than the usual one

capital0ne

Zero_Sum wrote: »

Didnt they previously charge a flat rate £5 a day? I know some banks currently do. This is a lot more than 40% on small balances.

And in vast majority of cases i doubt it is a case of it being physically impossible to get by without using overdraft.

If you re-read my original post they did charge a flat rate of £5.
"The bank at the moment charges a £5 daily fee for every day you are in the red, capped at £80 a month.
That £5 fee will be scrapped from next year, with the cost of borrowing for all customers capped at £20 a month.
Presumably that's on top of the interest you'll pay!"
And as I said this is a fee, it's presumably on top of any interest the overdraft generates.

born_again

TheOutlineKid wrote: »

S

Putting the rate up to 40% is a disgusting thing to do. Other banks are already happily following along. The government first give a sh*t about this as usual.
.

Before you go OTT.

Most people will be better of with the change. What you have totally missed is the change from a Max charge of £80 month down to £20.
Sure a lot will now have to pay a bit of interest on their overdraft. And why not. It is NOT THEIR MONEY. It is a loan from the bank.

I've seen some figures based on the average o/d people have @ 39.9% & it's going to cost them something like 0.28p a month...

But you have to look at the regulator on this change.

Some of these comments are just appalling Ok, so you guys are content in your smug, self-righteous little no-overdraft worlds but this is really going to hit a lot of people who simply struggle to pay their bills.

If the banks wanted to they would find a way to implement technology so that cards would just stop working when the balance reached zero.

Which is going to effect the very people who struggle to pay their bills.... You can't have it both ways.

Sadly in other countries people go hungry and die. Here they just continue to spend and complain that they are allowed to and get charged for spending money they do not have.

YorkshireBoy

Sharon87 wrote: »

I've had this happen to me when something unexpected left my bank account.

The only unexpected thing that can leave your account is a DD you weren't notified about in advance, in which case you're covered by the DD guarantee. Everything else is expected isn't it?...or should be.

eskbanker

capital0ne wrote: »

If you re-read my original post they did charge a flat rate of £5.
"The bank at the moment charges a £5 daily fee for every day you are in the red, capped at £80 a month.
That £5 fee will be scrapped from next year, with the cost of borrowing for all customers capped at £20 a month.
Presumably that's on top of the interest you'll pay!"
And as I said this is a fee, it's presumably on top of any interest the overdraft generates.

I've been correcting these misconceptions repeatedly over on the original thread about this!

The £20 cap applies specifically to the cost of unarranged overdrafts so doesn't affect those using arranged facilities only, so it's not true to say that the cost of borrowing is capped for all customers*.

And it's not a fee on top of interest, it's a cap on the interest. That's the whole point of these FCA changes, to remove other charges and to return to interest only....

* Strictly speaking the annual cost of using an arranged overdraft is capped at 39.9% of the overdraft facility, but the point is that this could be way in excess of £20 per month!

Sharon87

YorkshireBoy wrote: »

The only unexpected thing that can leave your account is a DD you weren't notified about in advance, in which case you're covered by the DD guarantee. Everything else is expected isn't it?...or should be.

I thought I'd set up a direct debit on my other bank account, not my Natwest. My fault of course, but I didn't transfer enough money into my Natwest that month because I thought I set the DD on my HSBC one! I didn't get the text from Natwest about going into my OD until the next day, so couldn't transfer the money in before the end of the day to avoid the charge.

FIRSTTIMER

I am with First Direct, same situation 39.9% is ridiculous. I think the only way forward these days for a buffer is 0% purchase credit cards - I currently have a barclaycard one having had a Tesco one before that. That is my safety net these days instead of overdrafts.