Important Changes Coming to Your Overdraft
Your overdraft is about to change. Potentially, you could end up paying interest rates of almost 40%. If you’re worried, read this to learn more.
In this article, we'll cover:
Have an overdraft facility? You’re certainly not alone as this solution is used by millions of people across the country. However, two new laws are coming into effect which may dramatically change how you’re charged for this service.
This is important information as, potentially, these may make you financially worse-off.
The first change
Banks must now make clear that an overdraft facility is a debt. Instead of firms showing customers their available balances including their authorised interest amount, they will have to display this figure with the in-credit amount factored in.
For example, if you have an overdraft of £500 but you’re £100 in-credit, your balance would have indicated that you had £600 to spend. The recent changes though mean this figure will be only £100.
The second change
Following a ruling by the Financial Conduct Authority, daily and monthly overdraft fees will be prohibited from April. Although this has been welcomed by some consumer groups and charities, several banks have compensated for the change by increasing their overdraft rates – in some cases, by almost 40%.
The firms which have so far announced changes have been detailed below:
- Monzo – Before, they would charge rates of 50p per day. This figure is now between 19% and 39% dependent on credit score.
- Starling – Before, they would charge rates of 15%. This figure is now between 15% and 35% dependent on credit score.
- Nationwide – Before, they would charge rates of 18.90%. This figure is now 39.90%.
- HSBC – Before, they would charge rates of between 9.9% and 19.9%. This figure is now 39.90%.
- M&S Bank – Before, they would charge rates of 15.90%. This figure is now 39.90%.
- First Direct – Before, they would charge rates of 15.90%. This figure is now 39.90%.
Worried if this could affect you?
If you use an overdraft on a regular basis, you might get a shock when you next check your bank balance. If it also looks like your finances are going to take a hit, then you should get in touch with us ASAP and we’ll strive to help find you a solution. Our experienced team can provide a complete range of debt consolidation loans to help you regain control of your finances, stop living in your overdraft and reduce long-term interest payments.
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Borrowing £7,500 over 36 months, repaying £502 per month, total repayable £18,083. Total cost of credit £10,583. Interest rate 69.9% (variable). The lenders on our panel offer loans for 12-60 months, with rates from 5.8% APR to 89.9% APR. The Representative Example is based on all loans paid out by lenders between 19th Apr 2022 and 23rd Dec 2022.
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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. All rates vary subject to loan amount, loan type and status. Repaying your debt over a longer period of time may increase the amount you pay.
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