Overdraft fees are set to hike to around 40% on April 6 due to new changes set in motion by The Financial Conduct Authority.
The new changes were proposed in December, aiming to make overdraft fees, “simpler, fairer and easier to manage.” The Financial Conduct Authority have described these changes as the biggest shake up to overdraft protocol for a generation.
From April 6, banks will no longer be allowed to charge a daily fee for being overdrawn. There will now be no difference between arranged overdraft prices and those that are not, but no cap on the cost either.
This is the change that could see overdraft fees rising to 40%. Banks such as Monzo, Nationwide and TSB are also cancelling overdraft buffers. Usually around a £20 – £50 buffer that you can dip into but will not be charged for.
These changes will have a massive effect on young people and student with 16-24 year olds, being the group who use an arranged overdraft the most and 44% have dipped into theirs during the past 12 months.
If you have a student account, an arranged overdraft is usually interest free for students from the U.K., whilst any other current account charges set interest rates depending on your overdraft; this can be over £1 a day.
Major UK banks that have announced they will charge almost 40% interest for being overdrawn are Bank of Scotland, Monzo, Santander, RBS, Barclays, TSB, HSBC.
You have till April 6 to sort out a plan and avoid these extra fees.
Student Services run a money advice drop in service Monday: 10:00am – 12:00pm (Room 2Z1), Tuesday: 12:00pm – 2:00pm (Room 2Z3) and Thursday: 12:00pm – 2:00pm (Room 2z3).
For more information visit: https://www.stir.ac.uk/student-life/support-wellbeing/student-support-services/money-support/