1p per £6 (£1250), then 1p per £7 (£1251 - £2500), 1p per £8 (£2500+)
More expensive for almost everyone, unless you borrow… over £4250
Small typo - We are asking for comments on this Consultation Paper (CP) by 18 March 2019.
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
“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
They’re proposals out for consultation at the moment, they’ll make a decision later in the year what is allowed
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.
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.
How is it sneaky?
You explaining this comment will never get tired
I fear I’ll be limited on number of quotes before I get tired
Would be funnier if people didn’t delete their query though.
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.
Overdraft changes due to take effect this summer has Monzo decided on its interest rate to replace 50p daily charge
The FCA has proposed the following:
- Ensuring the price for each overdraft will be a simple, single interest rate. So there will be no fixed daily or monthly charges.
That’s only proposed so far, haven’t seen a final ruling announced
I’ve had both types of overdrafts, with Halifax it was £1 per day; with HSBC it was based on an interest rate.
The former charges you just as much whether you are £10 overdrawn or £1000; the latter rewards keeping overdrafts small. I spent a week in my overdraft between Christmas and new year, just by maybe £50. I paid 10p in interest charges, but would have been closer £7 with Halifax.
As long as the APR doesn’t put Wonga to shame, an interest-based fee structure is my preference.
It’s unlikely to change. The latest consultation is more about the how (and when) than the what, I think.
I hope so or I will only use it in extremis
It is still technically in consultation stage (responses have now closed as at 18/03/2019) - FCA expects to provide their FG on it sometime in June 2019 for implementation 6 months later - so the guidance if unchanged won’t need to be implemented until December 2019 at the earliest.