TSB to hike overdraft charges from April
TSB has announced it will introduce a single 39.9% interest rate for overdrafts from April.
The lender is writing to customers to let them know of the changes which come into effect on 1 April.
From this date, it will introduce a single rate for both arranged and unarranged overdrafts at 39.9% EAR and it will remove monthly and daily fees attached to all overdrafts.
Currently arranged overdraft customers (Classic, Classic Plus) receive a £35 fee-free buffer and are charged 19.84% EAR on amounts above this. They’re also charged a £6 monthly usage fee.
Unarranged overdraft customers currently have a £10 fee-free and interest-free buffer and are charged £5 a day.
While the maximum monthly charge cap customers pay will come down from £80 a month to £30 a month, it will remove the £10 fee-free buffer for unauthorised overdraft users and the £35 interest-free amount on arranged overdrafts.
A TSB spokesperson, said: “Following these changes, 70% of TSB customers will pay the same, or less, for their overdraft than they currently do.”
As an example, an arranged overdraft customer borrowing £500 over seven days will pay £7.62 now and £3.26 from 2 April. The same amount borrowed over 30 days will cost more at £13.99 in April compared to £12.95 today. When borrowed for a longer period at 60 days, customers would pay £25.90 today, less than the £28.07 in April.
A host of banks have now upped their overdraft rates in response to new rules from the Financial Conduct Authority.
From April 2020, banks and building societies are 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.
At the time these rules were announced, experts predicted that banks would hike overdraft fees.
To date, these lenders have announced overdraft hikes: Barclays, Santander, Nationwide, HSBC, First Direct, M&S Bank, Monzo, Starling, RBS and NatWest.