First Direct and M&S Bank latest to hike overdraft fees
The move follows that of their parent company, HSBC, which earlier this week announced an increase in overdraft charges from March.
Here’s what’s changing:
From 14 March 2020, it will remove the £5 daily fee for using an unarranged overdraft and it will cut the maximum monthly charge from £80 to £20.
It will bring in one interest rate of 39.9% EAR for both arranged and unarranged borrowing. Currently, customers pay an interest rate of 15.9% EAR on arranged overdrafts for amounts over £250. First Direct will retain its £250 interest free overdraft buffer.
An M&S Bank spokesperson said: “From 14 March, the interest-free overdraft amount on the M&S Current Account will increase from £100 – £250 and going forward the interest rate charged on any overdraft facility above £250 will be charged at 39.9% EAR.
“In addition, new M&S Current Account customers will also select the overdraft amount that meets their individual needs, rather than receiving an automatic £500 overdraft, the first £250 of any overdraft amount will be interest-free.”
The current account providers are responding to new rules from the Financial Conduct Authority (FCA) that apply to all banks and building societies.
From April 2020, they 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.
However, 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.