Top Banking News

Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 16/06/2019

With the announcement this week that the Financial Conduct Authority (FCA) will introduce a number of changes to make overdrafts fairer and easier to manage for borrowers, Moneyfacts.co.uk has examined data regarding unarranged overdraft fees. Our research discovered that consumers who use an unarranged overdraft by as little as £10 for two days could be charged as much as £25. Four providers across 11 current accounts would apply a charge in this example, of which two banks would charge more than the original unarranged overdraft amount:

Provider

Accounts

Fee

United Bank

Ace Current Account

£25

Danske Bank

Danske Choice

Danske Freedom

Danske Cash Reward Funded

Danske Cash Reward Non Funded

£25

Cater Allen Private Bank

Private Bank Account

Investment Account

Sterling Bank Account

£5

Nationwide Building Society

FlexDirect Funded

FlexDirect Non-Funded

Flex Plus

£1

Table 1 Current Accounts charging a fee for an unarranged overdraft of £10 for two days

 

Borrowers who go over their limit by £100 for five days would see 19 providers charge them a fee, with an average cost of £32.98:

Provider

Accounts

Fee

TSB

Classic

Classic Plus

£56

Cynergy Bank

Personal Current Account

£50

smile

Current

£50

The Co-operative Bank

Current Account – Everyday Rewards

Current Account – without Everyday Rewards

Everyday Extra – with Everyday Rewards

Everyday Extra – without Everyday Rewards

£50

NatWest

Select Account

Reward Silver

Premier Reward Black

Reward Platinum

Reward

Premier Reward

Premier Select

£40

Royal Bank of Scotland

Select Account

Reward Silver

Reward Black

Reward Platinum

Reward

Premier Select

Premier Reward

£40

Ulster Bank

Select Current Account

Private Current Account

£40

 

Allied Irish Bank (GB)

Current Account

£35

First Trust Bank (NI)

Current Account

£35

Clydesdale Bank

and Yorkshire Bank

Signature Current Account

B Current Account

£30

£18

Santander

Everyday Current Account

£30

Cumberland Building Society

Day 2 Day (18 – 23 and 24 and over)

Cumberland Plus

£25

Danske Bank

Danske Choice

Danske Freedom

Danske Cash Reward – Funded

Danske Cash Reward – Non-funded

£25

First Direct

1st Account – without First Directory

1st Account – with first Directory

£25

HSBC

Advance

Bank Account – Age 24 – 64

Bank Account – Age 18 – 23

Bank Account – Age 65 and over

£25

Nationwide Building Society

FlexDirect – Funded

FlexDirect – Non -funded

FlexPlus

£25

United Bank UK

Ace Current Account

£25

Cater Allen Private Bank

Private Bank Account

Investment Account

Sterling Bank Account

£5

Monzo Bank

Monzo Current Account

£2.50

Table 2 Current Accounts charging a fee for an unarranged overdraft of £100 for five days

Of the 142 accounts reviewed by Moneyfacts.co.uk, 90 accounts from 27 providers would not charge a fee at all in this scenario.

Michelle Monck, finance expert at Moneyfacts.co.uk, said “Our research shows that consumers can end up paying a high penalty for even the smallest unarranged overdraft. Banks and building societies can vary their fee structure depending on the specific account you have with them. So, consumers should regularly review their current account fees and check if switching to another account with the same provider or to a new provider who might provide them with a better safety net.  From April 2020, new rules come into force that will remove fixed fees from overdrafts and stop unarranged overdrafts being priced at a higher rate.  This should mean that some of the very highest fees shown in our research are limited in the future.”

One in 10 UK adults, just over five million people, are choosing to live a largely cashless lifestyle, while debit cards continue to be the most popular payment method according to UK Finance’s latest Payment Markets Report.

The report states that, having overtaken cash in 2017, debit cards remained the most popular payment method in 2018, accounting for nearly 40% of all payments. In addition to this, nearly the entire adult UK population (98%) now own a debit card. It also forecasts that by 2024, debit cards will be used for half of all payments.

The rise in debit card use has been in part contributed to the growth in contactless payments, which increased to 7.4bn in 2018, an increase of 31% on the previous year. Overall 69% of the UK adult population uses contactless payments and it is not just younger people who have embraced this technology, as over three-fifths (61%) of over-65s made contactless payments in 2018, which is an increase of 50% from 2017.

As part of its new procedure to help victims of financial abuse regain control of their finances, HSBC UK has introduced an untraceable sort code.

This introduction has been made to help victims of financial abuse who may have had personal items such as their bank card or account statements taken from them. Customers who are concerned an abuser could use these details to find out their location can request a national sort code that cannot be traced to a particular bank branch.

This is just one of several new processes the bank is introducing this year to help victims of financial abuse. Other processes it is introducing include providing training to staff on how to spot the signs of financial abuse and providing appropriate support to victims, as well as creating a specialist team to take calls from customers who are in vulnerable circumstances.

Tracie Pearce, commercial director at HSBC UK, said: “Victims of financial abuse have unique needs when it comes to separating and managing their finances.

“From opening a separate account with a national sort code to help conceal their location, to appointing a third party such as a representative from a refuge to deal with their finances on their behalf. Our financial abuse procedure will ensure that whenever a customer walks into our branch or picks up the phone to us, they will receive the specialist care they need.”

The Financial Conduct Authority (FCA) has announced a host of changes today to make overdrafts fairer and easier to manage. The summary of changes includes banning fixed fees, such as daily or monthly charges for using an overdraft facility and an end to higher pricing for unarranged versus arranged overdrafts.

Overdrafts cost the UK public £2.4bn in 2017 and more than 50% of banks’ unarranged overdraft fees came from just 1.5% of customers in 2016. In some cases, overdraft fees can be 10 times as high as fees for payday loans.

Further reforms published today, include the requirement for banks and building societies to help customers compare overdrafts by using an APR when advertising arranged overdrafts, pricing overdrafts more simply using an annual interest rate and ensuring refused payment fees reasonably reflect the costs of declining the actual payments.

The regulator will also require overdraft providers to identify customers in financial difficulty and develop a strategy to help these customers reduce repeat overdraft use.

Comprehensive research by the FCA with consumers showed they also wanted the costs of an overdraft shown in pounds and pence alongside the APR and interest rate. UK Finance – the trade body that represents the financial sector – has agreed to implement this alongside the other FCA requirements.

Andrew Bailey, chief executive of the FCA, said: “Our radical package of remedies will make overdrafts fairer, simpler and easier to manage. We are simplifying and standardising the way banks charge for overdrafts. Following our changes, we expect the typical cost of borrowing £100 through an unarranged overdraft to drop from £5 a day to less than 20p a day.

“The decisive action we are taking today will give greater protections to millions of people who use an overdraft, particularly the most vulnerable.”

The new rules come into force 6 April 2020, apart from the guidance on refused payment fees, which comes into force immediately.

A new innovative card design to make it quicker and easier to identify the correct way a card should be inserted into a cash machine has been launched by NatWest this week.

Working closely with the Alzheimer’s Society, NatWest created the new card design to help customers with dementia. The new card will be used by all customers and the bank hopes that this will remove the stigma of having to use a special bank card.  The new card includes extra features such as notch and raised dots, which differentiates it from traditional cards and acts as a reminder to dementia and sight impaired customers about which way around the card should be inserted into cash and payment machines.

David Wheldon, NatWest chief marketing officer, said: “We know more of our customers could benefit from our accessible cards and this is a great way to not only help people with dementia and visually impaired customers but also ensures all customers can take advantage of the new design.”

Also commenting on the new card, Jeremy Hughes, Alzheimer’s Society chief executive, added: “We are heartened to see NatWest listening to the challenges faced by people with dementia when using their debit card, and providing their innovative accessible card to all.

“There are 850,000 people with dementia in the UK today and this number is set to rise to one million by 2021. It’s vital that businesses offer Dementia Friendly products which help overcome the challenges faced by people with dementia.

“Through our Alzheimer’s Society Dementia Friends initiative, we know the majority (83%) of people with memory problems have turned to businesses that they feel are more accessible. It has been proven that if you get it right for people with dementia, you get it right for everyone.”

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