Barclays to introduce 35% overdraft interest rate
Barclays has announced it will start charging interest on overdrafts in March instead of daily fees.
The bank is writing to customers to let them know of the changes which come into effect on 22 March.
It will introduce a single 35% EAR arranged overdraft rate.
Currently customers receive a £15 fee-free buffer, followed by a 75p per day charge on overdrafts up to £1,000, £1.50 per day up to £2,000 and £3 a day for amounts over £2,000.
Barclays confirms it will retain the free £15 buffer. However, customers with a feature store pack who have an overdraft will have the first £100 of their overdraft interest free. Premier customers with an overdraft have the first £500 interest free.
The majority of customers (94%) will see no change in the amount they’re charged for being overdrawn, or will see a reduction in charges under the new overdraft rate.
But for those who could be paying more, Barclays will proactively contact customers to make sure they’re aware of the changes and offer support.
It doesn’t offer unarranged overdrafts.
A spokesperson for Barclays, said: “We want to help our customers manage their money with transparency and ease. This is another step towards offering our customers greater control over their finances, alongside our existing alerts and the huge range of tools within our app.”
Barclays follows a growing list of banks responding to new rules from the Financial Conduct Authority (FCA) relating to overdraft charges.
From April 2020, banks and building societies will be required to stop charging customers higher prices for unarranged overdrafts in comparison to arranged overdrafts and they will not be allowed to charge fixed daily or monthly overdraft fees.
So far, Nationwide, HSBC, First Direct, M&S Bank, Monzo, Starling, RBS and NatWest have all hiked their arranged overdraft fees.
Experts said that the overdraft fee hikes are an undesirable side effect of the regulator’s rules, adding that it’s only a matter of time before other banks follow suit.