It is in response to the rising cost of living which has seen inflation levels soar and borrowing costs rise.

The three high street banks have all announced the changes to help customers who may be struggling financially.

Several banks extended the interest-free buffer to those struggling financially during the Covid pandemic in 2020.

HSBC and first direct

HSBC is offering some customers an increase to the interest-free buffer available with some current account overdrafts from £25 to £500. The extra money will be available for 12 months for eligible customers.

It is available to those who already have an overdraft and one of the following accounts: a bank account, Advance Account, Bank Account Pay Monthly or Current Account.

Those who want to apply for the extra money must complete a form via the HSBC website before 31 March 2023. If confirmed, they will be told the start and end dates of the extra money within seven working days.

Customers of first direct, which is owned by HSBC, can also benefit from a bigger overdraft buffer. However, it said customers don’t need to contact the bank because it is in the process of contacting all eligible customers. The 1st Account usually has a £250 interest-free overdraft included automatically.

The bank is also removing the penalties it charges if savers close fixed-rate savings accounts early. This is to allow people access to the money early, if they need it, without facing a fee for doing so.

Greg Went, head of customer propositions at HSBC UK, said: “During the challenging months ahead, we’re committed to being there for our customers and helping them when they need us most.

“At a time when customers are facing more financial pressures than usual, an interest-free overdraft can help with unexpected expenses. For those that need to dip into savings to help make ends meet, we are also waiving early withdrawal fees on our fixed rate accounts.”

Lloyds

Lloyds said it has offered 130,000 customers an extension to their interest-free overdraft of up to £500 for six months.

Jasjyot Singh, chief executive officer of consumer lending for Lloyds, said: “We know that some of our customers will need more targeted support, and that’s why we are offering 130,000 customers who use their overdraft regularly and are more likely to be financially struggling a £500 interest-free buffer for six months.

“We’re also actively urging any customer worried about their finances to get in touch with us to talk through the help we can offer.”

We also approached Barclays, NatWest, and Santander to ask if they were offering an overdraft extension to customers.

NatWest said if a customer is having difficulties it would encourage them to speak to the bank, Santander and Barclays confirmed they were not changing customer overdrafts.

A Barclays spokesperson said: “If customers are finding it difficult to manage their finances, we have a dedicated team of colleagues who are able to work with customers to offer tailored support, using a range of short and longer-term options.”

Many banks, including those mentioned in this article, have also launched support schemes including advice and information for customers who are struggling with rising costs.

What happens when the interest-free buffer ends?

If you do successfully manage to extend your interest-free overdraft buffer, it’s important to remember that after the period, of six or 12 months, the usual interest rates will apply.

Both Lloyds and HSBC charge 39.9% EAR for any money borrowed outside of the interest-free buffer which is significantly higher than other borrowing options, such as a personal loan or even a credit card in some cases.

If you are struggling financially, you can also receive free and confidential help from charities including Step Change, Citizens Advice and National Debtline.