UK banks waive overdraft fees or increase fee-free buffers to help customers during the coronavirus pandemic
Barclays is the latest bank to waive interest on overdrafts for all UK customers to help those struggling financially due to coronavirus.
From 27 March until the end of April the bank will not charge customers for using an agreed overdraft.
The interest will be waived automatically, so customers do not need to take action to get the benefit.
On 22 March, Barclays introduced a new single overdraft interest rate of 35% to comply with new regulations coming in from the Financial Conduct Authority (FCA).
Barclays' flat fee replaced daily arranged overdraft charges ranging between 75p and £3.
Gillean Dooney, managing director at Barclays, says: “It’s crucial we offer the right support to our customers through this challenging time.
"We have therefore decided to waive all overdraft interest until the end of April, meaning there will be no charges for customers to use their arranged overdraft."
What are other banks doing?
Lloyds, Halifax and Bank of Scotland this week announced that they will give all customers a £300 interest-free overdraft buffer.
This means that customers will be able to use the first £300 of their overdraft without paying any interest.
The change will come into effect automatically from 6 April and run for three months until 6 July.
Currently, all three banks charge the following arranged overdraft fees:
- 1p per day for every £6 borrowed up to £1,250
- 1p for every £7 borrowed between £1,250 and £2,500
- 1p for every £8 borrowed over £2,500
From 6 April, Lloyds, Halifax and Bank of Scotland will charge a single overdraft fee of either 27.5%, 39.9% or 49.9% depending on the account you have and your credit score.
HSBC will also waive interest on the first £300 of its arranged overdrafts from 26 March for three months.
The bank introduced its single overdraft fee of 39.9% last year.
Vim Maru, retail director at Lloyds Banking Group says: "The introduction of the £300 interest-free overdraft will give our customers some important breathing space at this difficult time."
A spokesperson from HSBC says: "We are here for our customers in these truly extraordinary times."
Why are banks introducing a single overdraft fee?
Lenders make more than £2.4 billion from overdrafts each year, with around 30% of this coming from unarranged overdraft charges, according to the FCA.
The financial watchdog unveiled new plans to overhaul the industry in 2019.
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 ones.
They will also be banned from charging additional fixed fees. Instead, lenders will have to use a single interest rate.
Bank overdraft Interest.
Once again the banks have made sure that we are still ripped off by this move.
In the case of HSBC customers with an arranged overdraft who do not exceed the arranged amount normally called a limit, will now see the interest rate doubled from 19.9% (max') to 39.9%.
HOW DO THEY GET AWAY WITH THIS - If the utility companies did this there would be a revolution.
WIth the base rate at 0.10% just how re such extortionate rates justified. It is about time the Fat Cats were on the receiving end of legislation requiring that NO financial institute is allowed to charge more than say 20% above base rate - the rates mentioned in this article are akin to rates charged in some of the now defunct money lenders - preying on the most needy element of Society at the worst of times. A fee free overdraft of £300 is laughable to a self employed person who has seen their income come to an immediate and unprecedented stop.
ALL IN THIS TOGETHER
It's nice to see banks make this move. But surely they could go further.
Why can't they INCREASE overdraft limits for the duration of this emergency?