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Millions of Britons use an arranged or unarranged overdraft every year. However, new changes are coming into effect which means this could now become extremely expensive.
These changes come after a decision by the Financial Conduct Authority to ban daily overdraft fees and instead pay an annual rate. Furthermore, although some people do not view an overdraft facility as a debt, banks must now make this fact clear.
First, instead of your account provider showing how much money you have which includes your authorised interest amount, banks will now display your balance with the overdraft factored in.
For example, if you are £500 into your overdraft – but £100 in credit – your bank would have indicated you have £600 available. However, with the recent changes, the in-credit amount will be displayed as £100.
From the bank’s point of view, this indicates a customer’s actual financial situation. However, for those not expecting the changes, they may get a shock when checking their finances.
Secondly, the scrapping of daily overdraft fees may seem like good news to many but several banks have already compensated by hiking up their rates. For example, some providers are charging overdraft fees of almost 40%.
Although banks do not need to comply with this ruling until April, the firms which have announced changes already have been detailed below:
50p per day
*Dependent on credit score
If you regularly use an overdraft facility, these changes will probably come as a shock – even just the high interest rates disclosed by some of the institutions above may leave you financially worse off.
If you’re worried about the effect this could have on you, get in touch with a member of our team today. We’ll be able to advise and help identify the best solution for you.
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