High street lenders, including HSBC, Santander, Nationwide and Lloyds, are pushing up overdraft interest rates to 39.9%.
In many cases, these rates have doubled, meaning that customers face significantly higher borrowing charges, even if they only dip into the red occasionally.
Banks have increased these rates after new rules will ban them from charging higher rates on unauthorised borrowing with effect from April 2020. So rates are rising on agreed overdrafts to make up for this lost revenue.
If you use overdraft facilities you should check with your bank whether other forms of borrowing may be more cost effective for you. For example, the average credit card levies an interest rate of around 20%, similar to the previous overdraft charges, but the exact rate charged depends on individual credit scores. Alternatively, take a closer look at spending and saving habits. If you are considering alternatives such as long-term loans, it is wise to seek advice before committing.
Contact us to discuss your individual circumstances and we can help you to come up with a plan to avoid unnecessary overdraft fees.
In the wake of Coronavirus (COVID-19), your bank may have made some changes to your overdraft facility, such as offering or increasing an interest free amount. Read more here and speak to your bank to find out how this may effect you.