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Not seen it reported as much as I'd have thought it would be, considering how many people it will impact - so thought worthy of a mention.
https://www.bbc.co.uk/news/business-51278036
It will only adversely affect those with un-arranged overdrafts ...
I put a call into Barclays telephone banking team about 3 weeks ago and had it fully explained to me.
If you stay within your arranged overdraft you will be better off.
Yeah it’s unarranged overdrafts.
Edit #2: My bank is going from 20% to 40% on arranged overdrafts.
I’d check with individual banks though as some are changing the charges.
Yeah it’s unarranged overdrafts.
Careful with that assumption...
Part of text I got today:
“Based on your account balance today they'll be paid, but will take you into your arranged overdraft - you'll be charged daily at an annual rate of 39.9%.”
I don’t ever use my overdraft these days - I get paid tomorrow and knew the payments I made will be fine - but I do have an agreed overdraft limit that has been on the account for years (that the payment due in no way would have breached).
It will only adversely affect those with un-arranged overdrafts …
Not true on either of my accounts, with two different banks.
If you stay within your arranged overdraft you will be better off.
Depends on your overdraft limit and how much of the month you're overdrawn. For a while when Mrs MikeG was on maternity leave and until the kids started school we had a £2k limit and would be in it for most of the month. I think we paid about £10 a month at the time, looking at most accounts they will soon be charging about 10p per £100 per day and I reckon we'd be looking at over £30 a month if we were still in the same situation.
I imagine there are lots of people who live in their overdrafts who will have to pay massively more come April
Yeah, the primary aim of the FSA rules bringing about the changes are to reduce the costs on unarranged overdrafts. The banks have decided to recoup the loss of earnings by increasing the cost of arranged overdrafts so they are effectively both the same. So anyone regularly using an arranged overdraft will be screwed. Apparently charging more will help people out of persistent debt. 🤔
The way I read it for mine, it goes from a daily fee (£1-£3 depending on amount) to 40% APR on arranged OD.
And no fees whatsoever on unarranged OD. No APR, no daily fee, no fee for payments despite lack of funds, and no fee for refusing payment due to lack of funds.
Might take all my money out and see what happens 😉
That's Santander.
Edit #2: My bank is going from 20% to 40% on arranged overdrafts.
Yep, in fact most if not all the high street banks have jumped to a remarkably similar rate completely independently of each other.... yeah right.
ODs have now become more expensive than credit cards and millions of people use them every month as a matter of routine.
They’ve always been a bad product but now they’re terrible.
So Santander is 39.9% on authorised overdrafts, but 0% on unauthorised overdrafts. (Was a quid a day, regardless of size of OD, up to £2k) What’s the point of having a small overdraft in that situation? Shirley better not to have an authorised one? Or run up a huge one, then drop the authorised limit to zero?
My first direct account has 0% on first £250 of my arranged OD then ~40% if I go over the £250 regardless whether arranged or not.
A lot of people are going to be hit quite hard I think in a couple of months
My first direct account has 0% on first £250 of my arranged OD then ~40% if I go over the £250 regardless whether arranged or not.
It was £5 per day for unarranged no matter how small.
Yep, in fact most if not all the high street banks have jumped to a remarkably similar rate completely independently of each other…. yeah right.
The FCA set the maximum rate at 40% so it's greed rather than conspiracy.
The FCA set the maximum rate at 40% so it’s greed rather than conspiracy.
Yup it even tells you that on the bbc link.
If you live within your means it’s not an issue!
I opened this thread just to see how close this comment would be to the top of the first page. I wasn’t disappointed.
For clarity I don’t have an overdraft.
These kind of comments aren’t helpful in any way. Good for you being able to live within your means. For some people their wage barely covers basic outgoings. God forbid that you should fall ill, have an accident, be made redundant etc.
If only everyone was as brilliant as you.
Back when I worked at a bank, around 2007 so right at the height of the mis-selling stuff, overdrafts and credit cards were known as gateway products. Worked like this:
Person A finds themselves short at the end of the month by £50-100 so pops in branch to see what help can be done. Gets offered an overdraft of £100. After awhile they get used to having this extra spending power so they start to live their lives using it every month. Bank then offers an overdraft limit increase to £250, next time it's £500 etc. When it hits £1k person A is called in for an Account Review and their continuous time in their overdraft is flagged up. Reviewer offers a small loan or 0% credit card transfer for 3 months to pay it off. All good,except they don't cancel the overdraft so person A dips into it again. Repeat the Account Review etc. Easy to go from £100 for a few days to £1-2k in loans easily for a lot of the general public.
One of the reasons I left the job was constantly seeing people sucked into the life of everything 'on tick', it's a major problem and if it takes big charges for people to get the message early on that spending more than you earn is a bad thing I'm all for it. I know the banking regs are different now so anyone relying on an overdraft for day-to-day spending should flag up and appropriate help offered. Debt can be used for good but it is so often sold as 'credit' and people use it to the max and never think things through. Think of sofas sold as £10 a month not the actual price etc.
Oh and for the record I got fully caught up in that cycle and ended up owing nearly £40k with nothing that show for it. Paid it all off over 5 years of scrimping and scraping a while ago now. Never going back that way and will happily talk to anyone who is in that situation and help steer them back out. Being inside the industry for 3 years shocked me at how easy so many people got caught in it.
@reluctantjumper well done for getting out of it.
It’s a combination of banks not stopping people borrowing money and people not having self control enough to say no. What came first? Who knows.
I remember my mum telling me she needed an overdraft of only a few pounds in the late sixties just to buy a train ticket home from university. She had to go and speak to the bank manager to ask for it face to face and he wanted to know why she needed it and what plan she had for paying it back. Maybe we need to head a bit back towards that style of banking, maybe these charges will help?
I’ll get accused of victim blaming but I couldn’t care less, there’s no one with a gun to your head making you spend the money.
I’ll get accused of victim blaming but I couldn’t care less, there’s no one with a gun to your head making you spend the money.
That’s a spectacularly ignorant comment, especially in times of zero hours contracts...
It’s STW though tomhoward. Home of the affluent middle class white man bubble. He can resist spending on unnecessary things so everyone else must be in the exact same position. Poor people and those in debt have simply chosen to live that way. Aren’t they silly?
I’ll get accused of victim blaming but I couldn’t care less, there’s no one with a gun to your head making you spend the money.
Yes, you can buy SLX instead of XTR. Meanwhile, in the real world...
"It was £5 per day for unarranged no matter how small"
That is very true. It also wasn't 40% interest on balances between £250od and your arranged overdraft limit. Which is kinda the exact point this whole thread was about.
It also wasn’t 40% interest on balances between £250od and your arranged overdraft limit. Which is kinda the exact point this whole thread was about.
No, it was all overdraft charges will be 40% which they’re not.
Negative drac, you are mistaken.
To quote first direct's email sent 8 Dec 2019, 16:01;
" Arranged and unarranged overdraft interest rate 39.9% EAR variable if you borrow more than £250 (currently 15.9%)"
Ahh, I see you've made a cheeky edit drac after checking your facts...
Aye I completely misread your post.
But you’ll see it was a claim it’s all overdrafts it’s not it is only some banks.
I have been on both sides as well @reluctantjumper, both working in the industry and someone who once got into seemingly unmanageable debt. A long long time ago now for me. And anyone who talks about ‘living inside your means’ has never gone without food or heat when the cashflow has gone wrong. If a credit card or a loan or an od means you can buy the food with that, so you can put any cash you have onto an energy card to feed the meter, you’ll only hold off so long before doing so.
But you’ll see it was a claim it’s all overdrafts it’s not it is only some banks
And some of us are trying to make people aware.
And instead you're..well, who knows what you're trying to achieve.
That’s a spectacularly ignorant comment, especially in times of zero hours contracts…
Why do they make you spend money with menaces when you have a zero hours contract? 😂
I love to see people getting all righteous about this and slinging mud around. You have no idea how much I earn or what monetary situations I’ve been in the past, but feel free to cast judgement.
Why do they make you spend money with menaces when you have a zero hours contract? 😂
No, but they can cut your hours with no notice. Or not pay you if you get sick. What if the government screws up any universal credit owed? They dont make you buy food, or heat your (apparently optional) accommodation, but some people are just suckers for it I guess.
And some of us are trying to make people aware.
And instead you’re..well, who knows what you’re trying to achieve.
🤦🏻♂️
I give up.
@kelvin the wake-up for me was realising that after all my bills had gone out I had the grand total of £17.92 to survive 2 weeks. That had to cover food, fuel and any socialising. Thankfully I had the safety net of still living with my parents at the time so it was straight to Citizen's Advice the next free time I had. Sold a few things to get through that month and had to cycle to work but I got through it. The option of going bankrupt was there but I never took it, cut out a lot of stuff and took on an extra job. Worked pretty much solidly 7 days a week for 4 years, holiday time in one job would be used for overtime in the other etc. I've been super-careful with money ever since. Still had the odd loan for the odd thing (for my car as an example, paid off now), have a credit card for online for example but it's paid off every month and I have a buffer of all my bills and living costs would still leave me with £1-200 every month too even if I did no overtime at work. It's actually so much better knowing that everything I own is paid for. I know people who have everything on 'credit' and there's no way I could go back to that! A savings balance looks so much better than a Loan Repayment Figure.
I love to see people getting all righteous about this and slinging mud around. You have no idea how much I earn or what monetary situations I’ve been in the past, but feel free to cast judgement.
Not being righteous and your situation has no bearing on it. You’re simply assuming that everyone has the capacity to live within their means. On that front you’re just plain wrong and spectacularly ignorant of how a lot of people in this country have to live. Either that or you’re just being a troll.
Just opened a letter from Halifax telling me about the changes. Arranged overdraft fees are changing with these examples
£100 was 0p will be 4p a day
£500 was 33p will be 41p a day
£1000 was £1.16 will be 87p a day
£2000 was £2.65 will be £1.79 a day
£4000 was £5.23 will be £3.63 a day
So if I was £4k overdrawn I'd actually be nearly £50 better off a month.
If you live within your means it’s not an issue!
Sanctimonious, irrelevant and untrue. Well done.
Don’t worry about Swedishmetal he’s been banned as it’s a second account.
Don’t worry about Swedishmetal he’s been banned as it’s a second account.
Do we get to know who it was?
Do we get to know who it was?
Got to be CFH 😉
No, that wouldn’t be fair.
The FCA set the maximum rate at 40% so it’s greed rather than conspiracy.
Yup it even tells you that on the bbc link.
The FCA has told the Banks they need to explain to them 1) why they took it to the max, or near max 2) prove they didn't collude to remove competition.
No, that wouldn’t be fair.
From the rules:
it is always vital that you are happy that what you post on our site will remain in the public domain along with your username indefinitely.
Is the meaning behind that rule not supposed to be that if you post something you regret, tough you should have thought of that first?
Where's the incentive to not have multiple accounts so you can post inflammatory opinions if the worst that happens is the 2nd account gets closed and your still not accountable for those posts?
The FCA has told the Banks they need to explain to them 1) why they took it to the max, or near max 2) prove they didn’t collude to remove competition.
Indeed but read the bit at the top of the article too.
No, spoon.
I'm with Lloyds who've been singled out for gouging on this
I end up in my arranged overdraft at the end of the month, every year after Xmas & after summer hols
I should be ok by march tho
After I finished uni with a chunk of debt & a ridiculously poor salaried science job in the 0ties , I got into the overdraft & then loan trap described on page 1, looking back I was easy pickings for the bank. (I always resisted them on ppi tho - I can clearly remember the very hard sell & I had to really push to get him to admit not taking ppi wouldn't effect my chances of getting a loan approved- ****ers!)
It's incredibly depressing getting caught in that cycle and it took a lot of scrimping to get it all payed off.
What's messed up is that I was effectively paying much more in rent then too, than now with a mortgage
When you're at the bottom people seem to be lining up to take advantage of you.
If you live within your means it’s not an issue!
I know he's been banned, but I still feel the need to weigh in.
Overdrafts are pretty terrible products. They're expensive and maybe worse they're 'payable on demand' meaning if you lose your job / get sick or whatever when most credit facilities would have to allow you time to sort yourself out, they just pull them and make a bad day worse.
Really they should be treated as a back-up for small unexpected expenses, that time you need to call out a plumber and it's 2 days before pay day and it's been Christmas or whatever excuse you need to explain why you're skint, but really the banks, as usual, have taken the piss and given people ODs to the value of their salary so they're always in debt. My Wife had a £2k OD as a student Nurse, her income was less than half that, it was cheap while she was a student, but once she graduated it started to cost real, proper money and it was pretty hard to clear it.
But that's not to say Credit is bad, some people don't like it, it causes them stress, but it's pretty shitty to get all sanctimonious on people for using credit, or even using the 'wrong' credit. It's a one-sided battle between normal people and Banks who use a lot of smoke and mirrors to hide the cost of debt.
The truth though is that if everyone suddenly saw the light and "lived within their means" we'd fall into a deep dark depression not seen since the 30s.
As a former Banker and devout follower of MSE, I'd advise anyone with one of those ODs they use every month without fail to get rid ASAP, it's its in the thousands switch it for a loan, it might hurt a bit paying it off every month, but it's better than paying 40% for ever and a day.
Yup. I'm with Lloyds too. I've gone paperless but didn't read the message sent to me. I got an email saying if I didn't read the message they would put me back on paper invoices- I suppose so they can say I had been made aware of the situation.
thisisnotaspoon - agree. If having a 'second voice' is against the rules, then surely having the two voices made one is a logical correction.
No, that wouldn’t be fair.
Boo! Hiss! Shame them, shame them etc. 😀
You’re simply assuming that everyone has the capacity to live within their means.
Some people seem to be assuming that all people with overdrafts are ****less and irresponsible while others seem to thing they are all victims of circumstances. I think it's likely that neither view is correct. P-jay is right though, if everyone suddenly did start to live within their means the economy would take a hit we'd all be feeling for years.
@kimbers - it was Lloyds that did me too, although they added the PPI without me knowing so I had a lovely £4k payout 6 years ago. That went straight to paying off the last of what I owed so their downfall kind of helped me pay off what they started! I'll never have another Lloyds product again though.
Just a bump as a PSA. Feel quite strongly about awareness and impact of this.
I was fortunate enough to clear mine, but for those that aren't it's a shit situation; trapped by banks that encouraged overdrafts and now facing massive charges they never signed up for..
It all feels a bit under-reported and wrong.
with current virus situation lots of tradesmen and self employed are going to need help this month . not a good timimg .
Bear, it's been covered widely so I don't agree it's been under-reported.
As for being wrong - it's similar to uni fees in that as soon as a maximum is quoted that becomes the actual cost; that, I think, is clearly wrong but any 'investigation' will conclude....market forces and all that.
Given the covid-19 situation and gov's response to financial impact on individuals, small businesses, self-employed the implementation date could not have come at a worse time.
IF banks had any consideration and gov was competent there would be an agreement to defer the implementation date until any review/investigation was complete and covid-19 was under control so....several months into the future.