All new Lloyds, Halifax and Bank of Scotland customers will be given a 29.9% representative rate for their overdraft going forward – here are how the changes impact you
Lloyds, Halifax and Bank of Scotland are changing overdraft fees for millions of customers. The move means some people will save money as their rate will drop, while others could see their overdraft fees go up.
The banking group currently offers different overdraft rates, dependent on your credit score. The different rates you can currently be offered include: 19.9%, 29.9%, 39.9% and 49.9%. The majority of customers have an overdraft rate of 39.9%.
But changes being introduced over the next few days mean that its representative overdraft rate – which is the rate at least 51% of new customers get – will be 29.9%.
As part of the review, some existing customers could see their rate reduced, while others may see theirs go up.
A spokesperson from Lloyds was not able to tell The Mirror exactly how many customers will see their overdraft fees go up, but said “few” will see an increase. Anyone affected by the change will be contacted in due course.
All customers will be given seven days’ notice for overdraft rates going down and 60 days’ notice for overdraft rates going up. If your rate is going up, Lloyds will introduce temporary tiers for six months.
An overdraft allows you to borrow money through your bank via your current account, when your account balance is zero or negative. But it can be an expensive way to borrow money – check out our tips below for how to cut your costs.
A Lloyds spokesperson said: “We know many customers find it helpful to have an overdraft there for life’s unexpected costs and, to make that as affordable for our customers as possible, we’re lowering the interest rate most customers typically pay when they use an overdraft.
“This means the cost of using an overdraft will become cheaper for many, with Lloyds, Halifax and Bank of Scotland now offering one of the lowest representative overdraft rates on the market.”
How to cut your overdraft costs
If you’re struggling with your overdraft, check if you’re able to switch to an account with a 0% overdraft, so you have more time to clear what you owe without being charged interest.
Make sure you check if you’re likely to be eligible first before you apply. Another alternative could be to look at a 0% money transfer card.
These are a special type credit card that pays cash into your bank account, for a one-off fee. You would then use this money to pay off your overdraft, so you’re not accruing more interest in overdraft fees.
You should always make sure you can pay off your 0% money transfer card before your interest-free period is up – otherwise you’ll start to be charged interest, which defeats the point of using this card.
