NatWest and RBS overhaul overdraft charges

10 August 2017

NatWest and Royal Bank of Scotland (RBS) have become the latest banks to alter their overdraft charging structure.

The banks have increased their daily unarranged overdraft fee from £6 to £8. This charge applies to all accounts which are more than £10 overdrawn.

At the same time, it has reduced the monthly unarranged overdraft fees cap to £72 from its previous level of £90. The new charging structure took effect on 24 July 2017.

Customers with Black, Reward, and Select accounts are all affected.

These changes follow Lloyds Banking Group’s decision to revamp its own overdraft charges from November. Bank of Scotland, Halifax, and Lloyds Bank customers will all be charged 1p per day for each £7 of authorised borrowing.

There could be further changes to the way consumers are charged for going overdrawn in future as the Financial Conduct Authority continues to examine the market.

The financial regulator believes that overdraft charges applied by banks are often excessively high and that charging structures are too complex.

How can you beat NatWest’s overdraft charges?

NatWest says customers using its Select Account – its basic current account – are able to use its overdraft control service to try and avoid charges.

This minimises the risk of an account going overdrawn as it automatically declines most – but not all - transactions or payments that would send customers into the red. Unarranged overdraft fees also do not apply when the overdraft control is activated.

This is a free service but customers must ask the bank to have overdraft control added to their account.

A spokesperson for NatWest and RBS says: “Under 5% of our personal customer base get into unarranged overdraft usage. They typically borrow between £50 and £60 over an average of four days.

“Customers who use our overdraft control service are not charged any unarranged overdraft fees. This free service is just one of the many ways we are helping customers avoid unarranged borrowing and charges.

“We encourage any customers who are worried about their finances to get in touch.”

Which banks offer the best interest-free overdraft?

Our two Moneywise Best Buys both give account holders a healthy interest-free overdraft. Our top pick is the First Direct 1st Account, which offers a £250 interest free overdraft. Anything above that amount is charged at 15.9%.

The M&S Bank Current Account is also worth considering. This account has a £100 interest-free overdraft. Go further into the red and you’ll also be charged at 15.9%.

See this week’s Moneywise Best Buys guide to current accounts.

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