Money News

HBOS customers hit with 365% overdraft rate

By Becca Talbot - becca@consumerchoices.co.uk

If you’ve got an overdraft with Halifax or Bank of Scotland, get ready for a daily flat fee of £1 - equivalent to an 365% APR.

Halifax (www.halifax.co.uk) and Bank of Scotland (www.bankofscotland.co.uk) are changing their overdraft charges and plan to hit their current account customers with a daily flat fee from 6th December. Account holders will be charged:

• £1 a day for arranged overdrafts of up to £2,500
• £2 a day for arranged overdrafts over £2,500
• £5 a day for unauthorised overdrafts

The changes come into effect on 6 December and include a move by both banks to remove all debit and credit interest on their current accounts.

Dominic Lindley, personal finance campaigner for consumer watchdog Which?, said: “This is bad news for any customers who regularly use their overdraft as it's effectively a big hike in charges.”

Which? concluded that if you’re overdrawn by £100, a £1 a day charge is equivalent to an APR of 365%.

Lindley advised customers to “vote with their feet,” and to shop around for a better current account that suits their needs.

Halifax argued, however, that daily overdraft charging was already in place on its reward current account, launched in February this year, and that its customers rarely use their overdrafts.

A spokesman for Halifax told The Telegraph: “The vast majority of our customers don’t use their overdraft facility in an average month and those that do only go overdrawn for a few days usually at the end of the month.

“For customers who use their overdraft on a more regular basis we have specifically asked these customers to contact us so we can review their banking needs and ensure they are in the best account for their individual circumstances.”

About 10 million Brits have current accounts with Halifax and Bank of Scotland. The overdraft rate changes do not apply to student accounts, packaged current accounts, Easycash and Cardcash customers.