Reliance bank - new 10.75% overdraft rate

Stuart_W

One of the only banks to have revised overdrafts inline with the new regulations and not gone for around the 40% mark is the tiny Reliance bank.

They have, however, introduced a monthly fee of £5.

There is also a £2,500 limit on authorised overdrafts.

Not sure if this makes it better value for any particular pattern of overdraft use.

https://www.reliancebankltd.com/personal-banking/personal-current-account

I've never used an overdraft and don't really see the advantage (unless it's free) as credit cards seem a better option for short term borrowing until payday (as that's always free) and a personal loan would usually work out much cheaper for slightly longer borrowing.

Perhaps monthly fee and lower overdraft rate might be a model that emerges.

born_again

£5 charge is going to hit every customer, and may well lose them customers who never use/have overdraft.
Also no mention of any maximum charges.

Not sure that mainstream banks will look at a monthly charge. As that would in effect signal the end of free banking for everyone.
Could result in a lot of complaints and FCA having to act again...

Thrugelmir

Stuart_W wrote: »

Perhaps monthly fee and lower overdraft rate might be a model that emerges.

"Free banking" is very much a UK based concept. Though the demise has been mooted for a long time. If Reliance's offering proves to attract customers. Then perhaps some bigger banks will follow likewise and move to a continental approach of running current accounts.

born_again

Some interesting reading from the FCA about free if in credit banking from 2018. One link Pre the introduction of the new overdraft regulation to protect the vulnerable.
Yet to remove free banking (and this has been mooted for many years) will see many more people become vulnerable. As many will find the fee taking them over the edge.

Yes with a fee we may (or may not) see lower interest rates. (FCA already has cap in mind if they feel rates are too high) But will the fee cause more to be hit by interest charges than if no fee is in place.

One thing for certain. Banks will come out making more profits.