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.
| Provider | Account/Option Name | Old unarranged overdraft charges | New unarranged overdraft charges | ||||||
| Interest rate (EAR) | Usage fee per day | Total cost for £50 over 7 days | Total cost for £500 over 30 days | effective from date | Interest Rate (EAR) | Total cost for £50 over 7 days | Total cost for £500 over 30 days | ||
| Barclays Bank | Bank Account | 0.00% | £0.00 | £0.00 | £0.00 | 22/03/2020 | £0.00 | £0.00 | £0.00 |
| first direct | 1st Account | 0.00% | £5.00 | £35.00 | £80.00 | 14/03/2020 | 39.90% | £0.33 | £13.99 |
| Halifax | Reward Current Account | 0.00% | £0.00 | £0.00 | £0.00 | 06/04/2020 | 0.00% | £0.00 | £0.00 |
| HSBC | Bank Account | 0.00% | £5.00 | £35.00 | £80.00 | 14/03/2020 | 39.90% | £0.33 | £13.99 |
| HSBC | Advance | 0.00% | £5.00 | £35.00 | £80.00 | 14/03/2020 | 39.90% | £0.33 | £13.99 |
| Lloyds Bank / Bank of Scotland | Classic | 0.00% | £0.00 | £0.00 | £0.00 | 06/04/2020 | £0.00 | £0.00 | |
| M&S Bank | M&S Current Account | 0.00% | £0.00 | £0.00 | £0.00 | 14/03/2020 | N/A | N/A | N/A |
| Metro Bank | Current Account | 15.00% | £0.00 | £0.13 | £5.78 | 01/04/2020 | 19.00% | £0.28 | £12.18 |
| Monzo Bank | Monzo Current Account | 0.00% | £0.50 | £3.50 | £15.00 | 01/04/2020 | 19.00% | £0.17 | £7.20 |
| Nationwide BS | FlexAccount | 18.90% | £0.00 | £0.17 | £7.17 | 11/11/2019 | 0.00% | £0.00 | £0.00 |
| Nationwide BS | FlexDirect | 0.00% | £5.00 | £35.00 | £50.00 | 11/11/2019 | 0.00% | £0.00 | £0.00 |
| NatWest / Royal Bank of Scotland | Select Account | 0.00% | £8.00 | £56.00 | £80.00 | 02/04/2020 | 39.49% | £0.32 | £13.87 |
| Santander | 123 Current Account | 0.00% | £0.00 | £0.00 | £0.00 | 06/04/2020 | 0.00% | £0.00 | £0.00 |
| smile | Current | 18.90% | £10.00 | £60.00 | £60.00 | 04/04/2020 | 35.90% | £0.30 | £12.77 |
| Starling Bank | Current Account | 15.00% | £0.00 | £0.13 | £2.00 | 01/04/2020 | 15.00% | £0.13 | £2.00 |
| The Co-operative Bank | Current Account | 18.90% | £10.00 | £60.00 | £60.00 | 04/04/2020 | 25.90% | £0.22 | £9.56 |
| TSB | Classic Plus | 19.84% | £10.00 | £76.17 | £80.00 | 02/04/2020 | 39.90% | £0.33 | £13.99 |
| Virgin Money / Clydesdale Bank / Yorkshire Bank | Virgin Money Current Account^ | 0.00% | £6.00 | £42.00 | £100.00 | 12/12/2019 | 19.90% | £0.18 | £7.52 |
^Old overdraft charges based on B Current Account which was withdrawn from sale on 29th November 2019.
| Provider | Account/Option Name | Old arranged overdraft charges | New arranged overdraft charges | ||||||
| Interest rate (EAR) | Usage fee per day (unless otherwise stated) | Total cost for £50 over 7 days | Total cost for £500 over 30 days | Effective from date | Interest Rate (EAR) | Total cost for £50 over 7 days | Total cost for £500 over 30 days | ||
| Barclays Bank |
Bank Account | 0.00% | £0.75 | £5.25 | £22.50 | 22/03/2020 | 35.00% | £0.29 | £12.49 |
| first direct | 1st Account | 15.90% | £0.00 | £0.00 | £3.05 | 14/03/2020 | 39.90% | £0.00 | £7.00 |
| Halifax | Reward Current Account | 0.00% | £0.01 | £0.56 | £24.90 | 06/04/2020 | 39.90% | £0.33 | £13.99 |
| HSBC | Bank Account | 17.90% | £0.00 | £0.16 | £6.81 | 14/03/2020 | 39.90% | £0.16 | £13.29 |
| HSBC | Advance | 19.90% | £0.00 | £0.18 | £7.52 | 14/03/2020 | 39.90% | £0.16 | £13.29 |
| Lloyds Bank / Bank of Scotland | Classic | 0.00% | £0.01 | £0.56 | £24.90 | 06/04/2020 | 39.90% | £0.33 | £13.99 |
| M&S Bank | M&S Current Account | 15.90% | £0.00 | £0.00 | £4.88 | 14/03/2020 | 39.90% | £0.00 | £7.00 |
| Metro Bank | Current Account | 15.00% | £0.00 | £0.13 | £5.78 | 25/04/2020 | 34.00% | £0.28 | £12.18 |
| Monzo Bank | Monzo Current Account | 0.00% | £0.50 | £3.50 | £15.00 | 01/04/2020 | 19.00% | £0.17 | £7.20 |
| Nationwide BS | FlexAccount | 18.90% | £0.00 | £0.17 | £7.17 | 11/11/2019 | 39.90% | £0.33 | £13.99 |
| Nationwide BS | FlexDirect | 0.00% | £0.50 | £3.50 | £15.00 | 11/11/2019 | 39.90% | £0.33 | £13.99 |
| NatWest / Royal Bank of Scotland | Select Account | 19.89% | £6.00** | £6.18 | £13.51 | 02/04/2020 | 39.49% | £0.32 | £13.87 |
| Santander | 123 Current Account | 0.00% | £1.00 | £7.00 | £30.00 | 06/04/2020 | 39.90% | £0.33 | £13.99 |
| smile | Current | 18.90% | £0.00 | £0.17 | £7.17 | 04/04/2020 | 35.90% | £0.30 | £12.77 |
| Starling Bank | Current Account | 15.00% | £0.00 | £0.13 | £5.78 | 01/04/2020 | 15.00% | £0.13 | £5.78 |
| The Co-operative Bank |
Current Account | 18.90% | £0.00 | £0.17 | £7.17 | 04/04/2020 | 35.90% | £0.30 | £12.77 |
| TSB | Classic Plus | 19.84% | £35.00 | £6.05 | £12.97 | 02/04/2020 | 39.90% | £0.33 | £13.99 |
| Virgin Money / Clydesdale Bank / Yorkshire Bank | Virgin Money Current Account^ | 12.50% | £6.00** | £6.11 | £10.86 | 12/12/2019 | 19.90% | £0.18 | £7.52 |
*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.
For more information about bank accounts with overdrafts take a look at our guide on How does a current account overdraft work?.
You can also view all the bank accounts with overdrafts currently available by visiting our accounts with overdrafts chart.
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.
