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  • FIRST POST
    • DJMC
    • By DJMC 14th Jan 20, 6:19 PM
    • 63Posts
    • 81Thanks
    DJMC
    Has MSE caused my overdraft rate to increase by 24%?
    • #1
    • 14th Jan 20, 6:19 PM
    Has MSE caused my overdraft rate to increase by 24%? 14th Jan 20 at 6:19 PM
    I found out in December that my authorised overdraft rate had increased in November to 40% from 16%.

    We have two authorised overdrafts, £5k and £3k, and being self employed with varying income each month I didn't mind using the facility regularly to help with budgeting.

    The other day I saw Martin Lewis on the TV clucking like a hen in front of a crowd asking them to applaud him for the success in bringing the banks to task over overdraft fees. I'm assuming his success and their gain is my loss?

    I've now transferred my savings into my current accounts as a buffer against going overdrawn. Martin would say that makes much more sense - not paying 16% (or now 40%) and losing 1 or 2% in savings interest.

    But to me it represents wiping out my savings and makes me nervous. That nervousness isn't worth the saving I'm making in not going overdrawn. Illogical? Perhaps. But I wish things had been left as they were.
Page 2
    • eskbanker
    • By eskbanker 15th Jan 20, 10:19 AM
    • 12,163 Posts
    • 15,078 Thanks
    eskbanker
    This is just a general question - now the interest on arranged an unarranged overdrafts is the same, what is the advantage of an arranged overdraft?
    Originally posted by Rosie1957
    The advantage is that you know you have access to those earmarked funds, whereas without an arrangement being in place, you're at their mercy as to whether or not they'll honour transactions that would take you overdrawn.

    In this particular example of Nationwide, they've explicitly made it clear that, where practical, they'll decline attempted transactions that would take customers into unarranged overdrafts, as they're doing away with them:
    No more unarranged overdrafts from 11 November

    From 11 November, we’re removing unarranged overdrafts. This means you will not usually be able to spend over your arranged overdraft limit. And if you don’t have an arranged overdraft, then we’ll try to stop you from falling below a £0 balance. There are some cases where we can’t stop a transaction and you may go into an unarranged overdraft. That’s because they’re not charged at the same time that the payment takes place. If you go into an unarranged overdraft, you’ll only pay interest up to your arranged overdraft limit.
    It's unclear at this stage whether other banks will also take measures to prevent accounts becoming overdrawn without arrangement, but I'm not aware of any others making the same sort of explicit commitment that Nationwide have.

    Having said all that, even arranged overdrafts can be withdrawn at any time, albeit this is the exception rather than the rule and would be done with formal notification to the customer....
    • Voyager2002
    • By Voyager2002 15th Jan 20, 10:40 AM
    • 13,508 Posts
    • 9,328 Thanks
    Voyager2002
    40 - 16 = 24
    An increase of 24%
    Or would you have preferred "twenty four percentage points"?

    Originally posted by DJMC

    The overdraft interest rate has increased by twenty-four percentage points, an increase of 150 per cent. Both statements are appropriate, and mean different things. Had the overdraft interest rate gone up by 24 per cent, it would now be slightly under 20 % pa, an increase of almost four percentage points.
    • FtbDreaming
    • By FtbDreaming 15th Jan 20, 10:41 AM
    • 161 Posts
    • 294 Thanks
    FtbDreaming
    Ive done as the op and moved my savings account into my current account in order to get out of the overdraft pre April when my account changes comes into effect.

    I wont be one of these people but what about those that are almost maxed out on their overdraft then the interest charge takes them into unauthorised territory.... surely people are going to be left in serious poverty as I'm sure the banks wont be declining their own payments.

    I can just see a lot of people ending up in hot water over this and possibly defaulting on their accounts or moving their income over to other banks with no overdraft and only paying interest for years. Obviously not MSE users now but many users of the future will start popping up.
    • FtbDreaming
    • By FtbDreaming 15th Jan 20, 10:43 AM
    • 161 Posts
    • 294 Thanks
    FtbDreaming
    And to follow up... I only have high interest credit cards due to previous poor history and not attempted to upgrade in 3 years.. but these will now be cheaper than the overdraft so for some people it may encourage more credit card use.
    • Malkytheheed
    • By Malkytheheed 15th Jan 20, 10:45 AM
    • 48 Posts
    • 44 Thanks
    Malkytheheed
    This can impact a credit history. If I had an overdraft and was able to avoid using it, I would definitely not remove it from my account. It shows I'm able to manage available credit responsibly.
    Originally posted by yksi
    This is not correct.
    Well managed credit is a good thing. Overdrafts (used or not) are not a good thing. Lenders prefer to not see them. At all.
    Last edited by Malkytheheed; 15-01-2020 at 11:02 AM.
    • tempus_fugit
    • By tempus_fugit 15th Jan 20, 11:08 AM
    • 826 Posts
    • 782 Thanks
    tempus_fugit
    I found out in December that my authorised overdraft rate had increased in November to 40% from 16%.

    We have two authorised overdrafts, £5k and £3k, and being self employed with varying income each month I didn't mind using the facility regularly to help with budgeting.

    The other day I saw Martin Lewis on the TV clucking like a hen in front of a crowd asking them to applaud him for the success in bringing the banks to task over overdraft fees. I'm assuming his success and their gain is my loss?

    I've now transferred my savings into my current accounts as a buffer against going overdrawn. Martin would say that makes much more sense - not paying 16% (or now 40%) and losing 1 or 2% in savings interest.

    But to me it represents wiping out my savings and makes me nervous. That nervousness isn't worth the saving I'm making in not going overdrawn. Illogical? Perhaps. But I wish things had been left as they were.
    Originally posted by DJMC
    It’s not wiping out your savings, they had already been negated by having £8,000 in overdrafts. It’s important to always consider your finances as a whole and not just in parts.
    Retired at age 56 after having "light bulb moment" due to reading MSE and its forums. Have been converted to the "budget to zero" concept and use YNAB for all monthly budgeting and long term goals.

    Pedant point: There is no such word or construction as "I's", the word to use is "my".
    • getmore4less
    • By getmore4less 15th Jan 20, 11:15 AM
    • 38,439 Posts
    • 23,875 Thanks
    getmore4less

    But to me it represents wiping out my savings and makes me nervous.
    Originally posted by DJMC
    You can recreate your "savings" at any time by using your overdraft(s) again, which is what you were doing before.

    As long as they don't take your OD away nothing has changed you borrow money to pretend you have savings.

    Would be cheaper to run a 0% purchase card for cash flow management and a line of credit rather than an OD that charges interest.
    (which is what you were doing Budgeting is something different).
    • Thrugelmir
    • By Thrugelmir 15th Jan 20, 12:47 PM
    • 66,351 Posts
    • 58,409 Thanks
    Thrugelmir
    Overdrafts are designed for one thing, to make money for the bank.

    Originally posted by siborg
    Do you think banks should operate as charities then? The charges levied have to cover the true cost of providing the facility.
    “Risk comes from not knowing what you are doing. – Warren Buffett”
    • DJMC
    • By DJMC 15th Jan 20, 2:54 PM
    • 63 Posts
    • 81 Thanks
    DJMC
    You can recreate your "savings" at any time by using your overdraft(s) again, which is what you were doing before.

    As long as they don't take your OD away nothing has changed you borrow money to pretend you have savings.

    Would be cheaper to run a 0% purchase card for cash flow management and a line of credit rather than an OD that charges interest.
    (which is what you were doing Budgeting is something different).
    Originally posted by getmore4less
    Wrong.
    I cannot recreate my OD at 16%.
    • DJMC
    • By DJMC 15th Jan 20, 3:05 PM
    • 63 Posts
    • 81 Thanks
    DJMC
    I think you will find that they will have sent a variation of terms & conditions a while ago to cover the change in policy they have been forced to bring in.
    Every bank I'm with have.
    Also Nationwide were one of the 1st to announce the interest rate. So received a lot of publicity.

    You have also missed that the change does not come in till 06/04/2020....
    So you have admitted yourself that you know in advance of the change
    Originally posted by born again
    As has been said, it was upped in November. I complained and NW replied I would have accepted the T&Cs online via a chck box, as per my previous post.
    • DJMC
    • By DJMC 15th Jan 20, 3:19 PM
    • 63 Posts
    • 81 Thanks
    DJMC
    My Nationwide VISA payment, around £6k - I pay it off monthly of course - went out today and NW sent me a text to warn me of the 39.9% overdraft rate unless I pay in funds (as I intend to) by midnight tonight.

    They've never done that before. Guilty conscience perhaps?

    Anyway... as they sent the text at 7.04am, and it woke me up, I've complained:

    "I was woken this morning at 7.04am by your text advising me I was about to utilise my arranged overdraft.
    I understand why you now warn of the extortionate rate charged for overdrafts, but 7.04am is not acceptable.
    You should not be contacting customers at unreasonable times. Please refer to FCA handbook S7.9.4.
    I will accept £100 in compensation on this occasion, for disturbing me at an unreasonable hour.
    I can forward a copy of the text if you require it.
    Many thanks."

    Go on... say "well, you could have switched your phone off overnight or disabled texts" and I'll reply a) THEY could have read the rule book and b) my father is at death's door in a nursing home so I keep phone, and texts, enabled. There, saved you from feeling bad eh?
    • Silver Queen
    • By Silver Queen 15th Jan 20, 3:51 PM
    • 797 Posts
    • 3,432 Thanks
    Silver Queen
    Did you sign up to text alerts on your phone?
    Debt Totals July 2019::
    £350 Natwest Credit Card / ]Now £0 (paid off and closed 04/2017) £15,500 postgrad loan from parents/ Now £7,000 £5,000 sister loan/ Now £0£500 train ticket loan from parents / Now £0 (paid off 16/02/18)£2,000 Overdraft Now £0 (paid off 09/03/18) £1,967.83 Barclays 0% card Now £0
    Total £7,000
    • Malkytheheed
    • By Malkytheheed 15th Jan 20, 4:00 PM
    • 48 Posts
    • 44 Thanks
    Malkytheheed

    "I was woken this morning at 7.04am by your text advising me I was about to utilise my arranged overdraft.
    I understand why you now warn of the extortionate rate charged for overdrafts, but 7.04am is not acceptable.
    You should not be contacting customers at unreasonable times. Please refer to FCA handbook S7.9.4.
    I will accept £100 in compensation on this occasion, for disturbing me at an unreasonable hour.
    I can forward a copy of the text if you require it.
    Many thanks."
    Originally posted by DJMC
    Starting to think this whole thread is a troll thread now.
    Firstly... What on earth are you doing.
    Secondly. 7:04 is not in any way an "unreasonable time".
    Legally in fact "Night hours are 11.00 pm until 7.00 am" in the UK.

    So you don't have a leg to stand on.
    Last edited by Malkytheheed; 15-01-2020 at 4:07 PM.
    • eskbanker
    • By eskbanker 15th Jan 20, 4:00 PM
    • 12,163 Posts
    • 15,078 Thanks
    eskbanker
    7.04am is not acceptable.
    You should not be contacting customers at unreasonable times.
    Originally posted by DJMC
    I'm guessing they'll disagree that 7am is unreasonable, hence https://www.nationwide.co.uk/support/support-articles/faqs/understanding-unarranged-overdraft-text-alerts:
    We generate our alerts at 3am based on data available at midnight (and delay sending until a reasonable hour in the morning to avoid waking you too early)
    • born again
    • By born again 15th Jan 20, 4:02 PM
    • 1,425 Posts
    • 790 Thanks
    born again
    As has been said, it was upped in November. I complained and NW replied I would have accepted the T&Cs online via a chck box, as per my previous post.
    Originally posted by DJMC
    Ouch.
    Not aware of that as HSBC despite announcing the change in rate have not introduced it yet.

    Assumed that they were all going to wait till 06/04 to do it.
    • abz88
    • By abz88 15th Jan 20, 4:05 PM
    • 202 Posts
    • 109 Thanks
    abz88
    My Nationwide VISA payment, around £6k - I pay it off monthly of course - went out today and NW sent me a text to warn me of the 39.9% overdraft rate unless I pay in funds (as I intend to) by midnight tonight.

    They've never done that before. Guilty conscience perhaps?

    Anyway... as they sent the text at 7.04am, and it woke me up, I've complained:

    "I was woken this morning at 7.04am by your text advising me I was about to utilise my arranged overdraft.
    I understand why you now warn of the extortionate rate charged for overdrafts, but 7.04am is not acceptable.
    You should not be contacting customers at unreasonable times. Please refer to FCA handbook S7.9.4.
    I will accept £100 in compensation on this occasion, for disturbing me at an unreasonable hour.
    I can forward a copy of the text if you require it.
    Many thanks."

    Go on... say "well, you could have switched your phone off overnight or disabled texts" and I'll reply a) THEY could have read the rule book and b) my father is at death's door in a nursing home so I keep phone, and texts, enabled. There, saved you from feeling bad eh?
    Originally posted by DJMC
    7.9.4 states, "A firm must not contact customers at unreasonable times and must pay due regard to the reasonable requests of customers (for example, customers who work in a shift pattern) in respect of when, where and how they may be contacted."

    07:04 is not an unreasonable time, its when most delivery companies have their first delivery and the average UK person is awake at 07:00. Had you previously made a request not to be contacted in the morning?
    • abz88
    • By abz88 15th Jan 20, 4:11 PM
    • 202 Posts
    • 109 Thanks
    abz88
    Oh.. and also, the FCA handbook doesn't have a section 7.9.4. It goes from Section 7.1 to section 8.1. So not a clue what you are on about.
    Originally posted by Malkytheheed
    Not that I agree at all with OP that 07:00 is unreasonable, but they are right about 7.9.4, its under CONC Consumer Credit sourcebook section (its confusing, but the number re-starts for each section)
    • eskbanker
    • By eskbanker 15th Jan 20, 6:21 PM
    • 12,163 Posts
    • 15,078 Thanks
    eskbanker
    Not that I agree at all with OP that 07:00 is unreasonable, but they are right about 7.9.4, its under CONC Consumer Credit sourcebook section (its confusing, but the number re-starts for each section)
    Originally posted by abz88
    Indeed, and CONC chapter 7 is specifically about "Arrears, default and recovery (including repossessions)" so the reference to customer contact within that chapter should be interpreted in that specific context.

    CONC 7.9.1 makes it fairly clear that the contact referred to is primarily phoning (to pursue arrears, etc) rather than routine automated texts:
    A firm must ensure that a person contacting a customer on its behalf explains to the customer the following matters:

    (1) who the person contacting the customer works for;
    (2) the person's role in or relationship with the firm; and
    (3) the purpose of the contact.
    • DJMC
    • By DJMC 15th Jan 20, 6:32 PM
    • 63 Posts
    • 81 Thanks
    DJMC
    Starting to think this whole thread is a troll thread now.
    Firstly... What on earth are you doing.
    Secondly. 7:04 is not in any way an "unreasonable time".
    Legally in fact "Night hours are 11.00 pm until 7.00 am" in the UK.

    So you don't have a leg to stand on.
    Originally posted by Malkytheheed
    When did you join the forum? When did I join?
    Who can't find FCA rules?
    Who sets their alarm to 8am - me.
    Legal night hours? You refer to noise nuisance from houses and premises as defined by local authorities. I'm taking about banking rules.

    Who's the Troll?
    • DJMC
    • By DJMC 15th Jan 20, 6:34 PM
    • 63 Posts
    • 81 Thanks
    DJMC
    Originally posted by eskbanker
    That last quote is really helpful, but I can't find it on the page you linked to. Could you please advise under which heading it appears?

    They've done precisely what your quote says they wouldn't do - wake me.

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