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HSBC and First Direct extend £500 interest-free overdraft

Emma Lunn
Written By:
Emma Lunn

The two banks had been due to scrap the cost of living support for new applicants from 1 April, but now say customers have until 10 May to apply.

HSBC and its sister bank First Direct announced in December that it would be offering some customers an increase to the interest-free buffer available with some current account overdrafts from £25 to £500.

Those who wanted to apply for the extra money were told to complete a form via the HSBC website before 31 March 2023. This deadline has now been extended until 10 May.

A statement on the First Direct website explains why the bank is introducing extra support and how the buffer works. It says: “With prices continuing to rise sharply, we’re doing our best to help wherever we can. That’s why we’ve introduced some temporary support so if you’re finding things tough, you can pay less for arranged overdraft borrowing on our 1st Account.

“If you’re with us and have an arranged overdraft (one you have agreed in advance), you’ll already know we don’t charge interest on the first £250. Now, you can also opt in to our temporary support which means we won’t charge you interest on your arranged overdraft up to and including £500 for 12 months.”

Interest-free buffer

Most HSBC current account customers already get a £25 interest-free overdraft buffer, while many First Direct customers get £250 interest-free.

The £500 interest-free buffer is applied for 12 months from the date it’s applied to your account. After that, your overdraft charges will revert to the standard rates of 39.9% on borrowing above £25 for HSBC and above £250 for First Direct.

The extra buffer is available to those with HSBC’s Bank Account, Advance Bank Account, Bank Account Pay Monthly and Current Account and those with First Direct’s 1st Account.

How to apply for the interest-free overdraft

How you apply for the interest-free period depends on whether you currently have an arranged overdraft or not.

If you already have an arranged overdraft, you can request the support online. This will ask you for your contact details, current account number and sort code.

If your arranged overdraft limit is more than £500, only the first £500 will be interest-free – any borrowing above this will be charged at the usual interest rate of 39.9% EAR. If your arranged overdraft limit is less than £500, the whole amount will be interest-free, but your limit will stay the same.

If you don’t have an arranged overdraft, you’ll need to apply for one first. This will trigger a ‘hard’ credit check, which will be visible to other lenders on your credit report.

Switching to First Direct

Some HSBC customers may benefit from switching to First Direct as the subsidiary bank’s 1st Account offers many customers a permanent £250 interest-free overdraft.

If your HSBC account was opened before January 2020 and you don’t already have a First Direct account, you can currently get £175 for switching to First Direct.