Will my bank write off my overdraft fees during coronavirus?


Will your bank freeze overdraft fees until summer? What the big six are doing for customers and why they’ve NOT axed planned 40% rates

  • High street banks have set out overdraft measures during coronavirus
  • Includes increased fee-free buffers and writing off some charges
  • Many of the big names have new overdraft rates of nearly 40% 
  • Coronavirus symptoms: what are they and should you see a doctor?

Britain’s six biggest high street names have set out measures to help holders of Britain’s £7.7billion overdraft debt, including increased fee-free buffers and temporarily writing off overdraft charges.

But apart from NatWest/RBS, none of the banks have paused the introduction of new overdraft rates of close to 40 per cent or passed on successive Bank of England base rate cuts to unsecured overdraft borrowers.

This is despite the fact many of the UK’s biggest lenders have already passed these reductions onto mortgage borrowers, while HSBC, Lloyds, Nationwide and Santander’s overdraft rates of 39.9 per cent are now 399 times higher than the Bank of England base rate of 0.1 per cent.

Overdraft pain: Rates of nearly 40% were announced by the big banks pre-coronavirus outbreak

It means customers in financial trouble who take advantage of larger fee-free overdrafts to help them make ends meet could potentially be left with big bills following the coronavirus outbreak.

Some £7.7billion in overdraft debt was outstanding at the end of January, according to the latest figures from the Bank of England.  

Britain’s £72.2billion credit card debt pile is also likely to increase as furloughed and laid-off households turn to plastic to pay for vital items while waiting for government support to come through.

This is Money’s sister title Money Mail on Wednesday called for the UK’s biggest banks to put off overdraft hikes and waive fees. 

At that time, HSBC was the only major bank to offer overdraft borrowers relief, giving advance and bank account customers a £300 fee-free overdraft for three months from 26 March. 

Barclays subsequently announced on Wednesday morning that it was waiving all overdraft interest incurred by borrowers between 27 March and the end of April, ‘with new solutions to follow after this date’.

Lloyds Banking Group, the country’s largest current account provider which also runs Halifax and Bank of Scotland, followed HSBC’s lead and said all customers would be given a £300 interest-free buffer for three months from 6 April.

Santander said it was introducing a £350 interest-free overdraft buffer for three months from 6 April for all customers. 

And Britain’s largest building society Nationwide said it would not charge overdraft interest between 20 April and 1 July, but customers must complete an online form first, which is available from today.

But none of the five banks plan to row back on proposed overdraft changes which could see customers pay close to 40 per cent for borrowing. 

Barclays moved from a tiered daily fee rate to a flat 35 per cent APR on 22 March, while Nationwide set the cost of borrowing at 39.9 per cent for all its current account customers last November.

Which banks have announced changes to their overdrafts so far? 
Bank account  Old overdraft rate New rate for majority Fee-free buffer? 
Nationwide FlexAccount 18.9%  39.9%  No
HSBC Advance  17.9%  39.9%  Yes – £25 
First Direct First  15.9%  39.9%  Yes – £250 
M&S Bank  15.9%  39.9%  Yes – £250 
RBS/NatWest Select  19.89% (plus £6 monthly fee)  39.49%  No 
Monzo  50p per day above £20 19%/29%/39%  No 
Starling   15% 15%/25%/35%  No 
Barclays Bank Account  Tiered rate  35%  Yes – £15 
Santander  Tiered rate  39.9%  No 
TSB  19.84% (plus £6 monthly fee)  39.9%  No 
Lloyds/Halifax/TSB  Tiered rate  39.9%
(27.5% for Club Lloyds customers) 
Yes – £50 

Santander is moving from a daily rate to a 39.9 per cent APR on 6 April.  

HSBC hiked its overdraft rates from between 11.9 per cent and 19.9 per cent to 39.9 per cent across the board, while Lloyds is moving from a tiered daily rate to a risk-based pricing model which could see some less creditworthy borrowers pay as much as 49.9 per cent.

Most will pay 39.9 per cent, in a move which comes into force on the same day its interest-free buffer is raised to £300.

Only NatWest and Royal Bank of Scotland, which were bailed out by the taxpayer during the financial crisis, have not gone ahead with setting the cost of borrowing at close to 40 per cent.

It was due to move from a system which charged 19.89 per cent and a £6 monthly usage fee to one which charged 39.49 per cent over the next week; but has said it is freezing its rates at current levels for at least three months.

While it hasn’t frozen its overdraft rates, it has scrapped all fees and charges, meaning customers will pay 19.89 per cent for borrowing.

The new overdraft rates followed rule changes by the Financial Conduct Authority, designed to crack down on the cost of unarranged overdrafts. 

They could no longer charge for more unarranged borrowing and had to price overdrafts using one interest rate.

The regulator took heavy criticism for the consequences of the new rules, and in February asked banks to explain why they all came up with very similar overdraft rates. 

It told This is Money it had not shelved this enquiry due to coronavirus, and was continuing to look at the information provided.

In the meantime, it simply told banks they ‘must treat customers fairly and consider the needs of those potentially affected by the impact of coronavirus’. 

THIS IS MONEY’S FIVE OF THE BEST CURRENT ACCOUNTS

Santander’s 123 Lite Account will pay up to 3% cashback on household bills. There is a £1 monthly fee and you must log in to mobile or online banking regularly, deposit £500 per month and hold two direct debits to qualify.

Santander

NatWest’s Reward Silver Account offers a £175 switching incentive to new and existing customers as well as insurance cover for European travel. Customers can also earn rewards which can be redeemed as cash or gift cards.

NatWest

Club Lloyds’s Current Account offers benefits such as cinema tickets, magazine subscriptions and dining cards to current account holders. There is no cost if you pay £1,500 each month, otherwise a £3 fee applies. Must hold two direct debits to earn monthly credit interest.

Santander

HSBC’s Advance Account offers £175 cash if you switch to it. The account comes with a £1,000 starting overdraft and 2.75% regular saver account. There is no monthly fee, however you must deposit £1,750 per month into the account.

Nationwide

Nationwide’s FlexDirect account comes with 5% interest on up to £2,500 – the highest interest rate on any current account – if you pay in at least £1,000 each month, plus a fee-free overdraft. Both perks last for a year.

Barclays