Banning overdraft fees


#108

There’s another report out today (new thread here) which has an interesting piece of info on current overdraft charges:

A small subset of consumers – around 10% - are responsible for 60% of the value that banks derive from PCAs . This subset of consumers mostly either hold high balances in their current accounts or are heavy overdraft users.

Around three-fifths of UK consumers held a free-if-in-credit (FIIC) personal current account in 2016. FIIC accounts do not charge regular fees for core transaction services and continue to spark debate about how they are paid for and who is paying. There has been public concern that provision of these accounts is primarily paid for through overdraft charges incurred by vulnerable consumers, covering losses generated by other FIIC users.

These concerns are largely unfounded. Funding benefit, not overdrafts, is the main source of revenues that banks earn on FIIC accounts.

(emphasis mine)


(Gracjan Deresz) #109

Halifax got fair overdraft piecing.
They charge £0.01 for every overdrawn £7.00.


#110

Until January. Then it’s ridiculously complicated, more expensive, tiered charging structure


#111

If the FCA gets its way then tiered charging dies in December. Just one APR.


#112

The worst part about the 50p overdraft fee is that Monzo are forcing people to use it and not freely make use of another bank with lower overdraft fees.


#113

How are Monzo forcing people to use the overdraft :man_shrugging:


#114


#115

image https://i.pinimg.com/originals/4c/96/6d/4c966d2fafa857933c0614800fc24fe9.gif


(Gareth) #116

1p per £6 (£1250), then 1p per £7 (£1251 - £2500), 1p per £8 (£2500+)

More expensive for almost everyone, unless you borrow… over £4250
wut.


(Colin Robinson) #117

Small typo - We are asking for comments on this Consultation Paper (CP) by 18 March 2019.


(Oliver) #118

I much prefer the flat 15% APR that Metro and Starling use. I find it much cheaper for smaller overdrafts (say £250-500) than the 50p per day


#119

“In December the financial watchdog, the Financial Conduct Authority, outlined new proposals around overdrafts, including bans on fixed daily and monthly overdraft fees and on banks charging more for unarranged overdrafts.”

I saw this in their blog post. I said at the time I think Monzo’s overdraft is incredibly expensive - so are the 50p/day charges being banned from now on? Or is it things like Lloyds even worse tiered system?

(I realise if you have something like 1500 in overdraft it’s not expensive but less than that comparatively is rather expensive into the 100’s% APR)


Starling Discussion & Feedback
(#savetheseabass) #120

They’re proposals out for consultation at the moment, they’ll make a decision later in the year what is allowed


#121

I hope they do make a good decision. Forcing everyone to use simple APR’s in a percentage will make it significantly easier for customers to compare what they’re paying. Plus I dont think any of them would dare charge something like 60% for example as Lloyds do because it’d make them look prohibitively expensive.

Even if a customer cant work out what a 15% APR is in terms of charges (which for the general person, not using it as a major lending source, dipping into their overdraft is likely tiny amounts) - they could easily see this bank charges more or less etc. and see a ‘better deal’.

50p a day for Monzo, 1pound for Santander and Lloyds 1p for every 7pound is just sneaky in my opinion. Even the maximum charge of 15.50 with Monzo is made out to be reasonable and ‘clear’ but I’ve used several overdrafts and not for insignificant amounts and have never paid anything near this.


#122

I guess if Monzo did APR based overdraft charges “up to a maximum of £x per day” that could still fit the whole clear and easy to understand for money management stuff.

Although I don’t think anyone can argue that “£x per day” isn’t the easiest to understand overdraft.


#123

How is it sneaky?


#125

(Jamie 🏳️‍🌈) #126

You explaining this comment will never get tired :joy:


#127

I fear I’ll be limited on number of quotes before I get tired :joy:

Would be funnier if people didn’t delete their query though.


(Jamie 🏳️‍🌈) #128

This story from yesterday shows how MPs have criticised Lloyds for introducing changes to their complex charging structure “against the spirit” of the proposed FCA changes.

Whilst I feel Lloyds’s fees are deliberately set up to catch users out and ensure they pay more, the article highlights that popular opinion seems to be turning away from Tom’s belief that a fixed daily charge for overdraft use can be fair.