Lloyds, Halifax and Bank of Scotland to hike overdraft rates to up to 50%
From 6 April, Lloyds, Halifax and Bank of Scotland customers will receive personalised overdraft rates, based on their credit scores.
The majority of customers will pay 39.9% EAR (all accounts apart from Club Lloyds), some will pay 27.5% EAR (Club Lloyds) and some will pay a higher 49.9% EAR.
This is the highest overdraft rate announced by any lender as part of an overhaul of charges to come under new Financial Conduct Authority rules.
Currently, Lloyds Banking Group’s arranged overdraft fees are as follows: 1p for every £6 up to £1,250, then 1p for every further £7 between £1,250 and £2,500, then 1p for every further £8 over £2,500. These charges will be scrapped from April.
The group has also confirmed it will be reducing its fee-free buffer to £50 on some accounts, though its off-sale Premier account will see the buffer fall to £250 from £500.
Despite the changes, it said 90% of customers with an overdraft will pay less under its new pricing structure, with everyone paying a lower rate on their borrowing.
It added that of those customers who will pay more, they will see an average monthly increase of £1.89, with no-one paying more than £10 more a month. It will continue to apply overdraft charges daily, meaning customers can “take action sooner and avoid nasty surprises”.
Under the new structure, customers borrowing £500 over seven days will pay £3.22 under the 39.9% EAR and £3.85 for 49.9% EAR, a difference of 63p.
Currently, the banking group doesn’t charge unarranged overdraft fees or returned item fees after scrapping them in 2017.
A Lloyds Banking Group spokesperson, said: “We are writing to our customers to explain the new overdraft rates that will apply from April 2020. As a result of these changes, 90% of customers with an overdraft will pay less than they do today.
“The majority of customers will pay the APR of 39.9% on most of our current accounts, 27.5% on our Club Lloyds account. Customers will be offered a personalised overdraft rate, up to 49.9%, depending on their circumstances. We have not charged unarranged overdraft fees or returned item fees since 2017, and this will not change – we know this simple approach is valued by our customers.”