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Natwest overdraft rate hike kicks in on 7 August

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Written by: Emma Lunn
22/07/2020
The new overdraft rates were postponed to help customers with the financial impact of coronavirus.

The new overdraft rates will be a single interest rate of 39.49% for both arranged and unarranged borrowing.

As an example, if you borrow £500 for one day, it will now cost you 46p, or £3.24 if you borrow for seven days.

If you have a Graduate account, Natwest will only charge interest on any borrowing above your interest-free amount.

Natwest has an Overdraft Cost Calculator on its website to show customers exactly how much an arranged overdraft will cost.

Any unarranged overdraft interest will also be applied at 39.49% EAR (equivalent annual rate). Natwest will also be reinstating the £2.75 unpaid transaction fee but this will only be charged a maximum of once per month if the bank rejects a payment because you have insufficient funds.

The maximum monthly charge for unarranged overdrafts for all interest and unpaid transaction fees will be £20.

If you have a Select Overdraft Control account these changes don’t apply, as Natwest won’t charge any unarranged overdraft interest or unpaid transaction fees.

Overdraft rate rules

New rules set out by the Financial Conduct Authority were due to come into effect on 6 April.

The rule change meant that  banks and building societies will not be allowed to charge daily or monthly overdraft fees and instead will have to price overdrafts by a simple annual interest rate to help customers compare products.

The move saw banks overhaul their overdraft charging structures to comply with the rules. All the banks planned to increase their headline rate of interest as a result with most setting an EAR close to 40%.

But the majority of banks delayed the introduction of the higher rates due to coronavirus with the new higher rates now taking effect in July or August, or later, depending on your bank.

 

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