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Your Current Account is Changing
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Barclays First to Reduce Overdraft Fees
Writes Dan Drage dan.drage@consumerchoices.co.uk
Fears over OFT actions on unauthorised overdraft fees are forcing high street banks into a battle for current account customers.
Barclays (www.barclays.co.uk) will launch two new current accounts this month with radically improved unauthorised borrowing fees and terms.
Most customers (students are excluded) will be given a £1500 ‘personal reserve’ beyond their agreed overdraft limit.
Should this personal reserve be used, a charge of £22 will be levied, but customers will be allowed unlimited free transactions for the next five days. This is to prevent people running up the charge on charge debts that cost some customers thousands of pounds.
The new accounts will charge a flat fee of £8 for every transaction made beyond the personal reserve, up to a limit of five a day.
Barclays have said they will also increase the interest they charge on authorised borrowing and stop paying interest on basic bank accounts.
Presently, Barclays charge £35 plus 27.5% interest on unauthorised borrowing.
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"Customers will be allowed unlimited free transactions for the next five days after dipping into their personal reserve"
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Victory in the unfair banking test case for the OFT afforded it the right to investigate, and ultimately cap, unauthorised overdraft fees. Typical fees for borrowing beyond your overdraft without the bank’s consent are set at the £25 mark, with additional fees accumulated should you need to continue borrowing, plus interest.
A large proportion of current account holders complain of becoming trapped in a cycle of debt, where unauthorised overdraft fees incurred cause them to breach the terms of their overdraft again, and face more fees the following month. These monthly fees prevent the account holder from addressing their overdraft problem, and they can’t stop themselves from borrowing beyond their overdraft limit each month.
Chris Eagle, Commercial Manager at Credit Choices, anticipates a deluge of enquiries regarding this product:
‘Current account holders will like these terms, they compare favourably with most existing unauthorised overdraft fee policies’
He continues:
‘Expect the rest of the high street banks to follow suit. Maybe one of the other major players is gearing up to undercut these figures from Barclays?’
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