New Overdraft terms and conditions

shedboy52

I manage my finances pretty well.

I guess my point was more about the level of the interest being charged, and when compared to the level of interest the banks pay customers on current account balance and savings.

If its costly to run current accounts then the cost should be properly calculated and charged to all account holders....not recover costs through 35%+ interest charges and nominal (if at all) interest on cash balances

born_again

shedboy52 wrote: »

I manage my finances pretty well.

I guess my point was more about the level of the interest being charged, and when compared to the level of interest the banks pay customers on current account balance and savings.

If its costly to run current accounts then the cost should be properly calculated and charged to all account holders....not recover costs through 35%+ interest charges and nominal (if at all) interest on cash balances

Do you think that having to pay to have a bank account. Is going to see interest rates drop?

colsten

shedboy52 wrote: »

If its costly to run current accounts then the cost should be properly calculated and charged to all account holders....not recover costs through 35%+ interest charges and nominal (if at all) interest on cash balances

Oh great. Let's have another MSE-led campaign then which will result in all current accounts to have monthly fees, so that those who currently get a free ride pay their dues. That'll teach them banks a lesson :mad::p:mad:

born_again

colsten wrote: »

Oh great. Let's have another MSE-led campaign then which will result in all current accounts to have monthly fees, so that those who currently get a free ride pay their dues. That'll teach them banks a lesson :mad::p:mad:

Yea. Sometimes you wish ML would just shut up... And leave well alone. All these complaints about increased interest rates.... Not a peep about charges for a long time till this....:rotfl:

Just wish I was a quid behind him in the balance stakes...

JuicyJesus

born_again wrote: »

Yea. Sometimes you wish ML would just shut up... And leave well alone. All these complaints about increased interest rates.... Not a peep about charges for a long time till this....:rotfl:

Thing is that if he didn't have a "thing" to campaign about, he wouldn't have any relevance. After a while "switch energy and broadband suppliers to save money, don't spend money on tat" stops being interesting enough to get TV shows and column inches. It's really basic advice that anyone can give you. Also, realistically, a lot of this advice is hard to take, and involves reckoning with the idea that your lifestyle is limited by your finances. But "banks are !!!!!!!s who charge you lots, here's how you get lots of free* money back!"? Well, that's far more interesting... and far easier to swallow...

His "thing" before was bank charges. Then it was PPI. Then it was packaged accounts. Soon it'll be something else. Basically treating banks as an unlimited money pot where if you were charged any money for anything you could get it back, of course with the wise guidance of Mr Martin Lewis.

ryan121

Starling bank offer an overdraft at 15% if you have a decent credit rating. People just moan instead of looking elsewhere.

born_again

ryan121 wrote: »

Starling bank offer an overdraft at 15% if you have a decent credit rating. People just moan instead of looking elsewhere.

Except that....

That’s why Starling has always had a simple, transparent and easy-to-understand approach to its overdraft charging with a single flat interest rate of 15% (EAR variable). We’re now revising the overdraft rate on our personal current account from 15% to 15%, 25% or 35%, dependent on customers’ credit scores from 1 April 2020.

That flat 15% that they had... IS now going to be from 15 to 35%

Would be interesting to see what % of customers fall into which band and just what their credit score is. As well as is this a internal or external score that people can see.

ryan121

Even the highest rate is still better than every other bank I think.

Flobberchops

shedboy52 wrote: »

Just been notified by Barclays and NatWest that the changes to the T&C's on overdraft will result in interest being charged at 35% and 39% respectively. WOW.....banks are more expensive than loan sharks (possibly will break legs as well).

Their comparisons of typical charges under the existing and new schemes all indicate charges will reduce marginally!!!

Not sure about that but if true just goes to evidence how much the banks want to profit out of small levels of overdrafts that Joe Public have.

Dont expect overdraft interest rates on business lending is anywhere near these levels

Let's say you're a customer who is habitually an average of £100 in overdraft.

Barclays before: 365 days charged at 75p a day. £273.75 in OD fees.
Barclays after: £100 at 35%. Total annual charge is £35 in OD fees.
New system is cheaper for those who are usually less that £782 overdrawn (ignoring any fee free tiers).

NatWest (Reward Account) before: 12 months at £6 per month. £72 in OD fees.
NatWest after: £100 at 39.49%. Total cost £39.49.
New system is cheaper for those who are usually less than £180 overdrawn (ignoring any fee free tiers).

I'm sure any inaccuracies in my maths will be pointed out presently

pinkdalek

colsten wrote: »

You have a choice. It is not mandatory to use overdrafts.

However, in almost all cases it is absolutely true that the new %age-based charges will be lower than they used to be for unarranged overdrafts.

Where it hits badly, is with arranged overdrafts. If people need to borrow, they should look at loans, not at overdrafts.

Bottom line: I applaud the new rules. Hopefully it's a wake-up call for people to do everything possible to get rid of their overdrafts.

Spot on Colsten, overdrafts when used correctly are short term to help you out of a tricky situation eg short term cash to pay for a car repair knowing your salary is due, or a lump sum is due from an investment but you need to pay the bill now.

My concern is I will actually be better off on the new overdraft rates which makes you wonder if some people will just ignore?
I think the high interest rate the banks advertise is a positive and highlights how expensive they can be, I am not praising the banks but if a bank offered an overdraft rate of say 4% no one would bother, it is the kick up the !!!! some people need.
Thank you Martin Lewis for this.