Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 16/06/2019

With the announcement this week that the Financial Conduct Authority (FCA) will introduce a number of changes to make overdrafts fairer and easier to manage for borrowers, Moneyfacts.co.uk has examined data regarding unarranged overdraft fees. Our research discovered that consumers who use an unarranged overdraft by as little as £10 for two days could be charged as much as £25. Four providers across 11 current accounts would apply a charge in this example, of which two banks would charge more than the original unarranged overdraft amount:

Provider

Accounts

Fee

United Bank

Ace Current Account

£25

Danske Bank

Danske Choice

Danske Freedom

Danske Cash Reward Funded

Danske Cash Reward Non Funded

£25

Cater Allen Private Bank

Private Bank Account

Investment Account

Sterling Bank Account

£5

Nationwide Building Society

FlexDirect Funded

FlexDirect Non-Funded

Flex Plus

£1

Table 1 Current Accounts charging a fee for an unarranged overdraft of £10 for two days

 

Borrowers who go over their limit by £100 for five days would see 19 providers charge them a fee, with an average cost of £32.98:

Provider

Accounts

Fee

TSB

Classic

Classic Plus

£56

Cynergy Bank

Personal Current Account

£50

smile

Current

£50

The Co-operative Bank

Current Account – Everyday Rewards

Current Account – without Everyday Rewards

Everyday Extra – with Everyday Rewards

Everyday Extra – without Everyday Rewards

£50

NatWest

Select Account

Reward Silver

Premier Reward Black

Reward Platinum

Reward

Premier Reward

Premier Select

£40

Royal Bank of Scotland

Select Account

Reward Silver

Reward Black

Reward Platinum

Reward

Premier Select

Premier Reward

£40

Ulster Bank

Select Current Account

Private Current Account

£40

 

Allied Irish Bank (GB)

Current Account

£35

First Trust Bank (NI)

Current Account

£35

Clydesdale Bank

and Yorkshire Bank

Signature Current Account

B Current Account

£30

£18

Santander

Everyday Current Account

£30

Cumberland Building Society

Day 2 Day (18 – 23 and 24 and over)

Cumberland Plus

£25

Danske Bank

Danske Choice

Danske Freedom

Danske Cash Reward – Funded

Danske Cash Reward – Non-funded

£25

First Direct

1st Account – without First Directory

1st Account – with first Directory

£25

HSBC

Advance

Bank Account – Age 24 – 64

Bank Account – Age 18 – 23

Bank Account – Age 65 and over

£25

Nationwide Building Society

FlexDirect – Funded

FlexDirect – Non -funded

FlexPlus

£25

United Bank UK

Ace Current Account

£25

Cater Allen Private Bank

Private Bank Account

Investment Account

Sterling Bank Account

£5

Monzo Bank

Monzo Current Account

£2.50

Table 2 Current Accounts charging a fee for an unarranged overdraft of £100 for five days

Of the 142 accounts reviewed by Moneyfacts.co.uk, 90 accounts from 27 providers would not charge a fee at all in this scenario.

Michelle Monck, finance expert at Moneyfacts.co.uk, said “Our research shows that consumers can end up paying a high penalty for even the smallest unarranged overdraft. Banks and building societies can vary their fee structure depending on the specific account you have with them. So, consumers should regularly review their current account fees and check if switching to another account with the same provider or to a new provider who might provide them with a better safety net.  From April 2020, new rules come into force that will remove fixed fees from overdrafts and stop unarranged overdrafts being priced at a higher rate.  This should mean that some of the very highest fees shown in our research are limited in the future.”

How to avoid unarranged overdraft fees

Even with the new FCA overdraft regulations, borrowers will still be charged interest for going into an unarranged overdraft. To avoid these costs borrowers should ensure that if they do need an overdraft facility they choose a bank account that allows overdrafts and be aware of the overdraft rate charged. Alternatively, if access to emergency funds is required a 0% credit card offering money transfer, although this could charge a fee, could be considered instead, however if this option is taken borrowers need to ensure they repay the debt before the interest free term ends.   

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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