First Direct follows HSBC in hiking overdraft fees from March - MSE News

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Former_MSE_Naomi
Former_MSE_Naomi Posts: 519 Forumite
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in Budgeting & bank accounts
First Direct customers have been told their arranged overdraft interest rates will be more than doubled to 39.9% from next year, a day after parent bank HSBC revealed similar plans...
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'First Direct follows HSBC in hiking overdraft fees from March'
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  • john539
    john539 Posts: 16,966 Forumite
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    But FD is keeping £250 interest-free arranged overdraft at least, which many people have.
  • jon81uk
    jon81uk Posts: 3,782 Forumite
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    So for those who want to use an authorised overdraft it’s a significantly worse deal and may actually be better with a unauthorised one due to the £20 maximum!
  • Highland76
    Highland76 Posts: 519 Forumite
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    jon81uk wrote: »
    So for those who want to use an authorised overdraft it’s a significantly worse deal and may actually be better with a unauthorised one due to the £20 maximum!
    Better still, to avoid ANY charges stick to their free £250 overdraft limit! :T
  • Consumerist
    Consumerist Posts: 6,310 Forumite
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    I wonder if this swingeing overdraft interest rate anticipates an initial rush of bad-debt provision as some borrowers start to realise that they have nowhere to go.

    Methinks StepChange and the like could be quite busy in the new year. Now might be a good time for those who are going to be in financial difficulty to start the ball rolling.
    >:)Warning: In the kingdom of the blind, the one-eyed man is king.
  • davetza
    davetza Posts: 27 Forumite
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    Any suggestions on what my options are for changing banks because of this? I have a very large overdraft with First Direct that I use all the time. This is more of timing and cash flow thing and because I don't like moving money around when I know money is coming in a week or so. Mentally I also don't like having a large balance in my current account. It's a pity as First Direct are very good otherwise I feel this is just taking the mickey though.
  • Consumerist
    Consumerist Posts: 6,310 Forumite
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    edited 9 December 2019 at 5:16PM
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    davetza wrote: »
    Any suggestions on what my options are for changing banks because of this? I have a very large overdraft with First Direct that I use all the time. This is more of timing and cash flow thing and because I don't like moving money around when I know money is coming in a week or so. Mentally I also don't like having a large balance in my current account. It's a pity as First Direct are very good otherwise I feel this is just taking the mickey though.
    It really depends on how much is involved, some options are:
    Loan interest rates are at historical lows at the moment so you might consider paying off the overdraft using a loan.
    If your credit rating is reasonable you could go for a money transfer of the overdraft onto a new credit card. There are zero-% interest cards available to new customers. There is often around 4%-5% money transfer charge up-front.
    You might even consider a 'zero-% on-purchases' credit card which you could use for your everyday spending instead of from your current account. It will take longer to clear the overdraft this way but it should reduce month by month until cleared.
    In the end, the overdraft will have to be repaid so you will need to budget to repay over the duration of any deal you opt for.

    Edit
    Changing banks will probably be pointless in terms of current account overdraft charges. It seems likely that those banks who haven't yet declared their overdraft charges for next year will opt for the same 40% interest.
    >:)Warning: In the kingdom of the blind, the one-eyed man is king.
  • davetza
    davetza Posts: 27 Forumite
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    To be clear I use my over draft as short term borrowing. I only go into my overdraft for a maximum of two weeks normally shorter but I go into it fairly regularly. When I am asking for alternatives I mean other current accounts.
  • penners324
    penners324 Posts: 2,770 Forumite
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    Can you get out of that short term debt cycle? It's costing quite a lot in fees and interest.

    Move DDs to fit in when salaries are received?

    I'd much prefer to do this and move money around if it saves £5 a month in interest
  • Eco_Miser
    Eco_Miser Posts: 4,708 Forumite
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    davetza wrote: »
    To be clear I use my over draft as short term borrowing. I only go into my overdraft for a maximum of two weeks normally shorter but I go into it fairly regularly. When I am asking for alternatives I mean other current accounts.
    As mentioned, all banks are likely to be charging around 40%, since they can no longer hide part of the charge as fees.
    davetza wrote: »
    Any suggestions on what my options are for changing banks because of this? I have a very large overdraft with First Direct that I use all the time. This is more of timing and cash flow thing and because I don't like moving money around when I know money is coming in a week or so. Mentally I also don't like having a large balance in my current account. It's a pity as First Direct are very good otherwise I feel this is just taking the mickey though.

    A day or so I could understand, but weeks?
    As I see it you have three choices:
    1. Pay the 40% interest for convenience.
    2. Keep sufficient in your current account to avoid the overdraft.
    3. move money around to avoid the overdraft AND avoid having a high balance. Could you do most of this with standing orders?

    Since you like First Direct, stay with them.
    Eco Miser
    Saving money for well over half a century
  • born_again
    born_again Posts: 14,677 Forumite
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    davetza wrote: »
    To be clear I use my over draft as short term borrowing. I only go into my overdraft for a maximum of two weeks normally shorter but I go into it fairly regularly. When I am asking for alternatives I mean other current accounts.

    There won't be...

    ALL banks will be charging interest rates around the same.

    If you have savings available then just move enough across to ensure you do not exceed the £250 limit.
    Also remember it is a max charge of £20 a month. So you would have to be earning a fantastic interest rate to make more than that.
    Life in the slow lane
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