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New overdraft rules make it easier to avoid debt

New overdraft rules make it easier to avoid debt

Category: Banking
05/02/2018

If you're the kind of person whose bank account dwindles to almost zero every month before payday, you'll be happy to hear it's now harder to stumble into the red. New rules have come into force that require banks to notify you when you're getting close to going into debt on your current account.

The Competition and Markets Authority (CMA), which spearheaded the rule change, found that banks receive around £1.2 billion a year from unarranged overdraft charges. Naturally, that's money customers would much rather keep themselves, but it's hard sometimes to keep a close eye on your account to make sure you don't accidentally spend more than you have.

The alert, sent through text or mobile banking app, will give people time to move money from a savings account into their current account, or simply stop spending until they get paid. Note that while new customers will get alerts straight away, it can take up to a month before existing customers will start getting alerts when they're getting close to being in trouble.

And this isn't the only measure set out to help people. You should also be able to get a grace period if you do unexpectedly go into the red, giving you some time to transfer money over and avoid being charged. Furthermore, banks are now required to publicly announce their maximum monthly charges, which should make it a lot easier to see which provider you'd be better off with.

These changes come at the same time as the simplification of business account switching, announced on Friday. All combined, they make February the perfect time to consider changing your personal current account and/or your business current account. Even if you never get close to the red, a new account could have a lot of benefits you may currently be missing out on.

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 Any products featured may be withdrawn by their provider or changed at any time.

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