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Banks adjust overdraft terms as competition heats up

Banks adjust overdraft terms as competition heats up
Date of Publication: Monday, 18 August 2014 13:03

Several high street banks are adjusting the terms on their current accounts, affecting customers who frequently dip into the red.

 

Santander and HSBC are the latest to alter the fees applied to their overdraft facilities, which will improve terms for some customers but leave others facing higher charges.

 

Santander is altering the charges on its popular 123 Current Account for both authorised and unauthorised overdraft use with effect from Tuesday 19th August.

 

The bank is removing the monthly cap on authorised overdraft charges, so customers could face higher charges if they spend the majority of the month overdrawn.

 

Customers who use an unauthorised overdraft facility will face a more punitive charge of £6 per day. However, the paid item and unpaid items have been removed, which may be of some benefit to those who use an unauthorised overdraft.

 

Meanwhile, HSBC and its subsidiary First Direct are to introduce a £5 per day charge for customers who exceed their agreed overdraft limits.

 

The move, which comes into effect in the autumn, will replace a £25 fee that customers are automatically charged when they exceed their agreed limit.

 

The bank said that the new structure would reduce overdraft penalties “for the majority of customers”. However, those who spend several days at a time beyond their limit could see their charges rise.

 

First Direct

HSBC and First Direct (pictured) are to amend their overdraft charges in November.

 

Competition

The fate of the two banks has been largely contrasting since the launch of a new fast-track switch system in September 2013.

 

Santander has been one of the winners from the new switch service, as consumers have demanded more from their current accounts.

 

The popular 123 account, with its combination of cashback and in-credit interest worth up to 3%, has been attracting thousands of new customers.

 

The latest TNS Global Switching Index shows that Santander attracted 29% of new switchers during July – almost twice as many as the next closest rival, Halifax.

 

TNS Global Current Account Switching Destinations July 2014

Current account switching patterns, July 2014. Source: TNS Global.

 

HSBC, meanwhile, has been haemorrhaging customers. The same TNS Index revealed that the bank lost 10% of switchers, gaining only 3% in return.

 

First Direct, which offers a cash incentive of £100 for new switchers and scores highly for satisfaction, has fared slightly better. The provider also gained 3% of current account switchers but lost only 1%.

 

HSBC will hope that the amendments to its overdraft terms may prove enough to stop customers flocking out of the door to join rivals. Equally, it will hope to attract custom from those looking for more attractive terms on their overdrafts.

 

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Keith McDonald

Which4U Editor

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Monday, 18 August 2014 13:03
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  • £5 per month.
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  • Get 4 Months Fee-Free Arranged Overdraft when you use the Current Account Switch Service to move your current account to us and receive a Defaqto 5 star rated service.
  • Access to your money 24 hours a day 7 days a week through our e-banking service, 750+ branches, 24-hour telephone banking service, LINK cash machine network or even by post
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  • With the 1|2|3 Mini Current Account you'll get:
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