Justifying 35% interest charge on an overdraft

Thrugelmir

helpyhelper said:

The FCA have messed up here. They insist arranged and unarranged overdrafts are charged at the same rate. The only result is that arranged overdrafts become much more expensive

Didn't mess up at all. Overdrafts are now paid for by those that use them. There's no longer cross subsidy. Resulting in complete transparency. 

CKhalvashi

helpyhelper said:

The FCA have messed up here. They insist arranged and unarranged overdrafts are charged at the same rate. The only result is that arranged overdrafts become much more expensive

Completely agree. I seem to remember OD's being at around 20%, then banks introduced a daily fee for 'simplification', then banks changed to around 40%.

The problem with setting a maximum is that often it sets a target.

A_Lert

For people who use their overdraft for small amounts short term, the interest albeit high is much lower than the old fixed fee schemes were. If I remember rightly most people overdrawn under £1000 are better off now. If you're going say 20 or 50 quid overdrawn a few days before payday you'll be paying pennies, previously you were paying much more.

It's more expensive than a "prime" credit card, but about equal to "credit builder" cards, and a lot cheaper than payday loans.

enthusiasticsaver

Generally speaking overdrafts are more expensive than credit cards as they are meant for short term borrowing and although cheaper than payday loans the people that use them mostly are at a higher risk of not repaying them.  Honestly I don't know why anyone would choose this form of borrowing unless they had no alternative.