HSBC to outlaw £25 fee for bouncing transfers
HSBC is to abolish the £25 fee it charges customers who bounce a cheque or a direct debit from their account, and is to consider changing its overdraft fees structure.
As part of its drive to "simplify products and reward long term relationships", the bank said the nine million HSBC and First Direct personal current account customers will no longer be charged a fee if the bank declines to pay a transaction due to insufficient funds.
The fee will be abolished from Sunday 24 November. However, any charges incurred up to that date will still be payable.
It also said it is reviewing how to introduce a "simpler and more straightforward" overdraft service and will make an announcement on it in 2014.
At the moment, HSBC charges a £25 unpaid transaction fee when customers' have insufficient funds in their account and the bank is unable to extend them any further credit to cover a payment.
Brendan Cook, head of retail banking and wealth management for HSBC UK, said: "Removing the fee for unpaid transactions is the start of further improvements to our overdraft service. We are listening to our customers so the changes will make our service simpler and better reflect their needs."
The move will challenge HSBC's high street banking rivals. Lloyds Bank, for example, currently charges £10 for refusing a payment when there is not enough money in an account, while Nationwide charges £15 per failed transaction (capped at £75 per month).
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.