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Money Expert Martin Lewis Issues Urgent Warning About Overdraft Charges

Money Expert Martin Lewis Issues Urgent Warning About Overdraft Charges

Money expert Martin Lewis has issued a warning about new overdraft fees coming into effect this year, which could have a serious impact on millions of Brits.

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Speaking on ITV on Wednesday, the 47-year-old financial guru explained that the Financial Conduct Authority (FCA) has announced drastic changes to the way in which overdraft charges will work.

While the new charges may sound unfair, they're ultimately set to make overdrafts more transparent in the long-run.

The new industry rules - to be implemented from 6th April onward - will ban fixed fees for people going over their overdraft, which means no more daily and monthly charges for going over your arranged limit.

The Money Saving Expert has issued a warning (Credit: ITV)
The Money Saving Expert has issued a warning (Credit: ITV)
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However, this could be bad news for the millions of Brits who stay within their arranged overdraft limits, as some banks will instead be increasing their annual interest rates to almost 40 per cent.

This means you'll be charged a percentage (up to 40) of the total amount you are overdrawn within the 12-month period.

Martin explained: "The problem with overdrafts is that they're a stealth debt. You don't apply for them, you just end up in them.

"Right now, everyone with a bank account needs to understand what's changing - good and bad."

For some, it may be time to consider paying your overdraft off (Credit: Pexels)
For some, it may be time to consider paying your overdraft off (Credit: Pexels)

He added: "Back in 2005, banks would charge £35 a pop for going overdrawn. It would be £35 per transaction ie if you made seven transactions, you'd be charged seven times.

"The system was designed to entrap customers. [But] last July, the regulator said that from April 2020, banks will no longer be able to charge you a ine for going over your overdraft limit.

"That means that, while they can still charge you what it costs them, they won't be able to impose daily penalty charges."

So, what's going on with your bank?

Check what your bank is doing to avoid losing money (Credit: PA)
Check what your bank is doing to avoid losing money (Credit: PA)

Barclays: Barclays will roll out changes on 22nd March 2020, increasing its charge to an annual interest rate of 35 percent.

It used to charge above 75p a day for overdrafts of up to £1,000, £1.50 a day for overdrafts between £1,000 and £2,000, and £3 a day for overdrafts of over £2,000.

First Direct: First Direct will roll out changes on 14th March 2020, increasing the charge to an annual interest rate of 39.9 per cent.

It used to charge an annual interest rate of 15.9 percent on all balances over £250 and up to any arranged overdraft limit.

HSBC: HSBC will roll out changes on 14th March 2020, increasing its charge to an annual interest rate of 39.9 per cent.

It used to charge £5 a day, or between 9.9 per cent or an annual interest rate of 19.9 per cent.

Monzo: Monzo will roll out changes on 1st April 2020, increasing its charge to 19 per cent, 29 per cent or 39 per cent depending on the customer's credit score. It previously charged 50p a day for going over your overdraft limit.

M&S Bank: M&S Bank will roll out changes on 14th March 2020, increasing its charge to an annual interest rate of 39.9 per cent.

It used to charge customers an annual interest rate of 15.9 per cent on all balances over £100 and up to any arranged overdraft limit.

Nationwide: Nationwide is the only bank to have already rolled out a 39.9 per cent annual interest rate.

It used to charge 50p a day or an annual interest rate of 18.9 per cent for going over your overdraft limit.

NatWest: NatWest will roll out changes on 1st April 2020, increasing its charge to an annual interest rate of 39.5 per cent.

It used to charge you an annual interest rate of up to 19.9 percent, plus an extra £6 a month for being over overdraft limit.

RBS: RBS will roll out changes on 27th March 2020, increasing its charge to an annual interest rate of 39.5 per cent.

Like NatWest, it used to charge an annual interest rate of up to 19.9 percent, plus an extra £6 a month for being over your overdraft limit.

Featured Image Credit: ITV

Topics: Money

Joanna Freedman

Joanna is a journalist at Tyla with a particular interest in highlighting women's issues and telling inspiring first person stories. She's also their resident foodie, and loves covering exciting new beauty launches, too. Contact her at [email protected]

 

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Money Expert Martin Lewis Issues Urgent Warning About Overdraft Charges

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