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Nationwide overdraft changes come into effect

Written by: Emma Lunn
The building society has introduced a single overdraft rate of 39.9 per cent, more than double the previous rate.

Current account customers with a Nationwide FlexDirect, FlexPlus or FlexAccount face a new overdraft regime from today, with accountholders paying a flat rate of 39.9 per cent APR interest for arranged overdrafts.

The rate is more than double the 18.9 per cent that the building society previously charged its FlexAccount customers for an authorised overdraft.

However, Nationwide will no longer charge unarranged overdraft charges, which previously cost £5 per day (up to £35 a month), or unpaid transaction charges of up to £15 a month.

Nationwide is the first current account provider to respond to a Financial Conduct Authority (FCA) ban on excessive fees. The regulator announced in June that it planned to tackle what it described as a “dysfunctional” overdraft market.

From April 2020, all banks and building societies will be required to stop charging customers higher prices for unarranged overdrafts in comparison to arranged overdrafts; nor will they be allowed to charge fixed daily or monthly overdraft fees.

Will you be better or worse off?

After the changes, the majority of Nationwide customers who use their overdrafts are set to be worse off – the building society says that based on overdraft usage for the past six months, two-thirds would be worse off under the new system. Of those worse off, three-quarters would pay up to 20p a day extra, so up to £73 a year.

Customers with a FlexDirect account previously benefitted from a £10 overdraft buffer and then a 50p-a-day fee for any arranged overdraft borrowing. The £10 buffer is now gone which means you’ll be worse off if you’re constantly overdrawn by less than £10 or by more than about £460.

If you have a FlexPlus account, you’d have previously benefitted from a £250 buffer and above that paid 50p each day. But the £250 buffer is now gone and the new 39.9 per cent APR rate applies. This also means you’ll be worse off if constantly overdrawn by less than £250 or by more than about £460.

With both the FlexDirect and FlexPlus accounts, if you only occasionally dip into your arranged overdraft, the point at which you’ll be worse off depends on how long you’re overdrawn for.

If you have a FlexAccount, you’ll now be worse off under the changes as the interest rate has been hiked from 18.9 per cent to 39.9 per cent APR. For example, if you borrowed £1,000 for one month, your charges would have been about £15 before, but would be about £28 a month now.

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