Revealed: the cost of new bank account overdraft charges

Moneyfacts.co.uk has found that consumers could be paying over twice as much for arranged overdrafts following our review of new overdraft charges announced by eight banks and building societies.
These new charges are in response to the rules announced last year by the Financial Conduct Authority (FCA) which forbids interest rates for unarranged overdrafts to be higher than arranged overdrafts. The new FCA rules come into force on 6 April 2020, but some providers have already introduced or announced updated overdraft fees.

The findings show that those who use an unarranged overdraft in the future will face significantly lower fees with all the products and scenarios we reviewed charging the same or less under the new rules.
The average fee for an unarranged overdraft of £50 over seven days across nine accounts reviewed is £26.87 – under the new pricing this reduces to an average of 20p, while a larger unarranged overdraft of £500 across 30 days reduces from an average of £54.91 to £8.06.
The B Current Account from Clydesdale and Yorkshire Banks (no longer available due to the introduction of the Virgin Money Current Account) would have charged £42 for an unarranged overdraft of £50 for seven days. The new fees announced for the Virgin Money current account (which replaces the B Current Account) reduces this to 18p. Nationwide Building Society has reduced its unarranged overdraft fees to zero on their accounts FlexDirect and FlexAccount.
The maximum unarranged overdraft caps, also known as maximum monthly charges, have reduced from £80 to £20 on four of the accounts reviewed and Starling Bank has maintained their cap of £2.00.

Those who use an arranged overdraft of £50 over seven days will see their overdraft fee drop from an average of £1.99 to 18p, with five of the ten accounts reviewed now charging less under the new regime. The lowest fee for this arranged overdraft is from first direct and M&S Bank with no charge (thanks to their interest free tier) and a 13p fee from Starling Bank.

The average fee for an arranged overdraft of £500 over 30 days increases from £8.96 to £10.29 across the ten accounts reviewed. Of these, six have increased in cost, three have reduced and one has remained the same. Some of the greatest increases come from first direct, Nationwide Building Society FlexAccount and HSBC Advance, whose fees increase by 130%, 95% and 77% respectively.
The cheapest fees for a £500 arranged overdraft for 30 days across the eight products reviewed was from Starling Bank at £5.78.
HSBC is introducing a new £25 interest free tier, while M&S Bank is increasing its £100 interest free tier up to £250. first direct retains its £250 interest free tier.

^{^Old overdraft charges based on B Current Account which was withdrawn from sale on 29th November 2019.}

^{*different fees apply to higher borrowing amounts.}

^{^Old overdraft charges based on B Current Account which was withdrawn from sale on 29th November 2019.}

^{**Fee is per month}

On April 6 2020, new rules come into effect with the aim of simplifying the fees many consumers face when they enter an overdraft. The rules from the FCA include banning fixed fees such as daily, weekly and monthly overdraft usage charges and stopping banks and building societies from charging higher interest rates for unarranged compared to arranged overdrafts.

There is more information about the new overdraft rules and how overdrafts work in general in our guide to overdrafts.

Find a bank account with an overdraft.