Many HBOS customers face overdraft hike New rules may mean extra costs
21 October 2009
Which? has warned that many Halifax Bank of Scotland (HBOS) customers may face increased overdraft fees when the group’s new charging structure comes into force.
HBOS is changing the way most of its current account customers will have to pay for their overdrafts from 6 December 2009, although those with student bank accounts, and Easy Cash accounts will not be affected.
The move means people will face flat daily charges for being in the red, rather than having to pay interest or the bank’s current controversial fees.
However, a customer overdrawn by £100 will have to pay a £1 daily charge for the privilege under HBOS's new rules – equivalent to 365% APR.
New overdraft charges
Under HBOS’s new scheme, arranged overdrafts of up to £2,500 will cost customers £1 a day. Overdraft facilities above this level will cost £2 a day, while a customer entering into an unarranged overdraft (or exceeding their existing limit) will face fees of £5 a day.
There will be no cap in place to limit the number of times these fees can be applied each month. This means a customer remaining in their unauthorised overdraft for 31 days would have to pay HBOS £155.
Small overdrafts hit hardest
However, customers who enter their overdrafts by just a few pounds each month will be hit hardest by HBOS’s new charges. This is because the smaller your overdraft, the higher HBOS’s fees will be in proportion.
While an individual owing HBOS £250 at the end of a difficult month might face daily overdraft charges equivalent to 146% APR, someone with an overdraft of £2,000 and paying the same daily fee would effectively be hit by a much lower APR of 18%.
How to switch your current account
Which? personal finance campaigner Dominic Lindley says: ‘This is bad news for any Halifax and Bank of Scotland customers who regularly use their overdraft, as it’s effectively a big hike in charges.
‘Anyone who's unhappy with the new charging structure should vote with their feet by shopping around and switching to a current account that best suits their needs.’
By opting for a Which? Best Buy current account, you could earn up to 6% on your in-credit bank balance or get an interest free overdraft for 12 months. The clever Which? current account finder will help you select an account that suits your needs, and our independent review contains everything you need to know about the switching process.
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what's going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.