- Fees being scrapped on 123, 123 Lite and Select/Private current accounts
- Unarranged overdraft fees on ‘free’ accounts will be capped at £50 per month, reduced from £95 per month
- Bank admits some customers will be left worse off
Santander will axe fees for unarranged overdrafts from some current accounts on 10 July 2018.
The Spanish-owned bank will remove charges from the accounts that it charges monthly fees for – namely its 123, 123 Lite and Select/Private current accounts.
On all other ‘free’ personal bank accounts, unarranged overdraft fees will be capped at £50 per month, reduced from £95 per month, and from 2 February, customers will be automatically registered for unarranged overdraft alerts ‘to help minimise or prevent fees’, reported the bank.
But is this an act of benevolence or merely a token gesture aimed at keeping the regulators happy?
On your marks: Santander is poised to cut unarranged overdraft fees associated with paid-for accounts, such as its popular 123 account promoted by Olympic medallist Jessica Ennis-Hill
Well it’s certainly the case that some customers will actually see their costs rise.
Santander admitted: ‘While the vast majority of overdraft users will benefit from these changes, a small proportion (0.1 per cent) could pay higher total overdraft fees as the monthly fee cap (MMC) will only apply to unarranged overdraft fees, whereas in the past it has applied to both arranged and unarranged combined.
‘All of these customers will be sent a letter outlining the changes and the options available to transfer to another Santander current account. Santander has specialist support teams in place to help customers who incur fees.’
Andrew Hagger, personal finance expert at Moneycomms.co.uk, said: ‘I think the move is partly down to the focus on unauthorised charges from the Competition and Markets Aurthority and Fincancial Conduct Authority and follows the move last December when Lloyds Bank scrapped unauthorised charges.
‘The difference is that Lloyds scrapped the charges across all current accounts, whereas Santander has been more selective – the charges have been abolished for those customers who pay a monthly fee for their bank accounts but for non-fee accounts the charges remain – albeit the monthly maximum has been capped at £50 per month.
‘Perhaps Santander hopes that this move will encourage more of its customer base to switch to its fee paying account to avoid paying unauthorised fees.’
Reza Attar-Zadeh at Santander UK said: ‘These changes mean four million adult current account customers will benefit from no unarranged overdraft fees on their accounts. On other accounts, the maximum unarranged fees a customer could pay each month will be almost halved and customers will be automatically registered for unarranged overdraft alerts to help them minimise or prevent such fees.’
The bank will be formally notifying customers of the changes with their February 2018 statements ‘ so will have time to review their options ahead of the changes in July’, Santander said in a statement.
How much does your bank charge for unarranged overdrafts?
Andrew Hagger has put together the following table for This is Money that gives a thorough run down of the costs associated with exceeding your overdraft limit without permission.
|Cost per month: £120 over limit for 3 days due to two debit card payments (debited same day)||Cost per year: £120 over limit for 3 days per month due to two debit card payments (debited same day)|
|M&S Bank||No fees or interest charged on unauthorised borrowing||0||0|
|Post Office||No monthly or daily fees for unauthorised borrowing. Max monthly charge £60 (unpaid fees and interest). Unpaid items £15 each plus interest (13.72%) 14.6% EAR||£0.14||£1.68|
|Halifax||1p per £7 borrowed per day this is the authorised overdraft rate no extra charges for unauthorised borrowing||£0.51||£6.12|
|Lloyds Bank||1p per £7 borrowed per day this is the authorised overdraft rate no extra charges for unauthorised borrowing||£0.51||£6.12|
|Triodos Bank||No fees for unauthorised borrowing. Unpaid items £5 each plus interest (16.7%) 18% EAR||£10.16||£121.92|
|The Co-operative Bank Current Account||Informal overdraft charge £10 plus £10 each time it increases, plus interest (17.44%) 18.9% – Maximum charge is £60 per quarter excluding interest||£10.17||£122.04|
|Nationwide Building Society – FlexAccount||Paid/Unpaid fee £5,- capped at £45 per month plus interest at (17.44%) 18.9% – interest capped at £5 per month||£10.17||£122.04|
|Tesco Bank||£5 paid item fee and £5 unpaid fee (max £50 per month max £75 per month including interest) plus interest (17.44%) 18.9% EAR||£10.17||£122.04|
|Barclays Bank Account||Emergency Borrowing Fee £5 per day max £35 per month (unpaid item fee is £8)||£15.00||£180|
|First Direct||£5 per day for unauthorised overdraft (max £80 per month including Interest (14.85%) 15.9% EAR||£15.15||£181.80
|HSBC||(18.36%) 19.9% EAR plus £5 per day (max £80 per month including interest)||£15.18||£182.16|
|Santander (non 123 accounts from July 2018)||£6 per day unarranged overdraft usage fees (max £50 per month)||£18.00||£216|
|Metro Bank||Paid item fee of £10 (max 6 per month) plus interest at 15.0% EAR||£20.15||£241.80|
|NatWest – Select||£8 per day for unarranged overdraft (Max £72 per month) Unpaid fee £8 max 1 per month (Total MMC £80)||£24.00||£288|
|RBS – Select||£8 per day for unarranged overdraft (Max £72 per month) Unpaid fee £8 max 1 per month (Total MMC £80)||£24.00||£288|
|TSB Classic Plus||£6 monthly fee plus £10 per day for overdrafts of £25 or more (max £80 per month) + interest (18.36%) 19.94% EAR||£36.18||£434.16|
|Source: Moneycomms, 26 January 2018|
Five of the best overdraft deals
There are a handful of accounts on the market offering fee-free overdraft buffers or to waive fees and interest on your whole overdraft for a fixed period.
We have rounded up the best options in our regularly updated guide here, but below are a few of our top picks.
First Direct’s First Account comes top of the polls when it comes to customer service, and it offers the largest interest-free overdraft buffer at £250 – after that it charges interest at 15.9 (EAR) per cent. Switchers currently get £125 cash to sign up (until December 11), it requires a £1,000 monthly deposit or you pay a £10 monthly fee.
M&S Bank’s Current Account offers a £100 fee-free buffer and also charges 15.9 EAR per cent. It currently pays £185 in vouchers if you switch and stay for a year. It also requires a £1,000 per month deposit.
Nationwide’s Flex Direct account offers to waive borrowing fees and interest for the longest at 12 months – the agreed limit will depend on your individual circumstances. After that there is a flat 50p charge each day to use an authorised overdraft or £5 for unauthorised borrowing. The account also offers the opportunity to earn 5 per cent interest on balances of up to £2,500 paid every month, which could be worth up to £125.
For a gimmick-free overdraft, Tesco Bank offers a flat rate of interest at 18.9 per cent on authorised or unauthorised borrowing. There is also a free Overdraft Control service that will stop any payments being made if it will take you into or increase your unagreed overdraft. The account also pays 3 per cent on balances up to £3,000 and Clubcard points for spending.
THIS IS MONEY’S FIVE OF THE BEST CURRENT ACCOUNTS