MSE News: Bank of Scotland, Halifax or Lloyds customer? It could be increasing your overdraft rate

MSE_Petar

If you're a Bank of Scotland, Halifax or Lloyds customer, the interest rate you're charged for using your overdraft could soon go up to 49.9% as part of a fees shake-up. The Lloyds Banking Group, which owns all three brands, says most customers will be charged the same or less after the changes – but others will pay more, and some Club Lloyds customers will see their rate nearly double, from 27.5% to 49.9%.

Read the full story:
'Bank of Scotland, Halifax or Lloyds customer? Beware – it could be increasing your overdraft rate'

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Nasqueron

The FCA review in 2023 of their changes to overdrafts (which MSE was so active in promoting) is quite interesting, though it doesn't cover any changes after their sample was done and it was published in April 2023. 

Mean monthly charge fell from £3.03 to £1.55 (though the max in the sample rose from £728 to £890) and average borrowing total fell from £126.49 to £86.53 with max falling from £81,512 to £79,940.

However, the interest rate charged shows what was obviously going to happen - mean for arranged was 7.7%, max 20%, post changes mean is 31%, max 50%; mean for unarranged was 1.7%, max 22%, post change mean 3.1% and max 40%

I wonder if these further increases will bring back the average cost of borrowing in line with the old fixed fee income

wiseonesomeofthetime

Never had an overdraft in my life, so these banks can put whatever rate on one that they like as far as I am concerned.

Don't spend what I don't have, so therefore never go into a negative balance. Simple really.

Bridlington1

wiseonesomeofthetime said:

Never had an overdraft in my life, so these banks can put whatever rate on one that they like as far as I am concerned.

Don't spend what I don't have, so therefore never go into a negative balance. Simple really.

I take a slightly different approach, ``never get charged for using an OD".

I'm more than happy to stooze a 0% OD as it can be rather profitable and I often pay out cheques from an account that has an arrange OD facility since as long as I clear the debt by the relevant cut off time they don't charge any interest so it means I don't have to keep money in a current account earning little/no interest whilst I wait for the cheque to clear.

adamp87

Lloyds already did this a few months back for me, never use it so not really bothered either 

Digital_Payback

adamp87 said:

Lloyds already did this a few months back for me, never use it so not really bothered either 

But those who do HAVE to use it, whatever their reason, are often the least well off, and by raising the rate of an overdraft to an extortionate amount the banks keep the less well off in persistent debt while making a larger than necessary profit from their overdraft. 

Banks call it business. I call it greed. 

Hoenir

Digital_Payback said:

adamp87 said:

Lloyds already did this a few months back for me, never use it so not really bothered either 

But those who do HAVE to use it, whatever their reason, are often the least well off, and by raising the rate of an overdraft to an extortionate amount the banks keep the less well off in persistent debt while making a larger than necessary profit from their overdraft. 

Banks call it business. I call it greed. 

Deliquent account management costs money.  No reason for other customers to bear the cost.  If costs aren't recouped then a business might as well stop providing the service. 

Digital_Payback

Deliquent account management costs money.  No reason for other customers to bear the cost. 

That’s what the banks would say. 

But what about the fines THEY have imposed on them for mismanagement and worse. Who pays then? Not the execs, but the customers. 

We will agree to disagree. 

I still would call an extortionate rate for an overdraft, greed. The profits probably far outweigh the risk. 

Nasqueron

Digital_Payback said:

Deliquent account management costs money.  No reason for other customers to bear the cost. 

That’s what the banks would say. 

But what about the fines THEY have imposed on them for mismanagement and worse. Who pays then? Not the execs, but the customers. 

We will agree to disagree. 

I still would call an extortionate rate for an overdraft, greed. The profits probably far outweigh the risk. 

Overdraft is you spending the bank's money. To avoid it, don't have one and / or don't use it

Whether the rate is extortionate is subjective but this was always going to happen when the fixed fee model was scrapped per MSE's campaign - perhaps they naively thought banks would compete to lower rates?