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Many HBOS customers face overdraft hike

New rules may mean extra costs
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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.

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