Barclays to shake up overdrafts from March 2020.
Barclays will introduce a new single interest rate of 35% EAR for overdrafts from 22 March 2020.
Currently, customers with an arranged overdraft receive a £15 fee-free buffer followed by a daily charge of 75p on overdrafts up to £,1000.
Overdrafts between £1,000 and £2,000 have a £1.50 daily charge while overdrafts over £2,000 are charged at £3 a day.
From 22 March, Barclays premier and packaged account holders will lose their fee-free overdrafts - which currently range from £200 - £1,000.
Barclays will still retain its £15 fee-free buffer and £3,000 fee-free buffer for student accounts when the new single interest rate kicks in.
The bank estimates most customers (94%) will either see no change in how much they are charged for using an overdraft or will see a reduction in the charges from March.
Barclays does not offer unarranged overdrafts on its accounts.
A spokes person from Barclays says: “We want to help our customers manage their money with transparency and ease.”
“This is another step towards offering our customers greater control over their finances, alongside our existing alerts and the huge range of tools within our app.”
Why is Barclays increasing its overdraft fee?
Lenders make over £2.4 billion from overdrafts each year, with around 30% coming from unarranged overdrafts, according to financial regulator the FCA. The financial watchdog has unveiled new plans to overhaul the industry.
From 6 April 2020, banks and building societies will no longer be able to charge higher interest rates on unarranged overdrafts than they do on arranged overdrafts.
They will also be banned from charging additional fixed fees.
Instead, lenders will have to use a simple interest rate to make overdrafts “simpler, fairer and easier to manage.”
Compare banks new overdraft rates
Barclays’ new 35% overdraft fee is noticeably cheaper than the other big banks, such as Nationwide, that charge almost 40%.
Starling Bank currently offers the cheapest overdraft interest rate.
Customers hoping to use an overdraft will be charged a flat fee of either 15%, 25% or 35% depending on their credit score.
The table below shows how Barclays’ fees for a £100 overdraft compares to other lenders.
|Bank||New overdraft fee||Charge over 7 days||Charge over 30 days|
How to cut the cost of your overdraft
Overdrafts can be handy for short-term borrowing.
To make sure you get the best rate on your overdraft, it’s important to shop around.
While banks are starting to introduce single flat interest rates, there is some competition in the market.
Starling Bank and Monzo, for example, offer the cheapest interest rates for eligible customers at 15% and 17% respectively.
Barclays will also keep it’s £15 interest-free buffer which could help cut the cost of going into an overdraft too.
If you have a bigger overdraft a specialist money transfer credit card could help reduce your overdraft repayments.
A money transfer card allows you to move money from your credit card to your bank account.
These cards often come with an initial transfer fee and a fixed 0% interest period too.
Tesco Bank currently offers the longest 0% interest period of 28 months.