Bank Charges Update
CONFUSED by the changes to bank overdraft charges? We explain what they mean - and how to claim back unfair fees
As the court hearing nears between banks and the Office of Fair Trading over unauthorised overdraft charges, several high-street lenders have announced changes to their charges.
Below we give the Which? Money verdict on the changes:
Lloyds TSB
Lloyds TSB has decreased its monthly unauthorised overdraft charges from a maximum of £90 to £15, and interest from 29.8 per cent to between 10.4 per cent and 19.3 per cent, depending on which account you have. However, it has also introduced day after day fees. For overdrafts of less than £25 the daily fee is £6, for amounts between £25 and £100 the fee is £15, and for more than £100 this rises to £20 a day, with a maximum of ten day after day fees charged in a month.
The new charges still appear to be excessive. Those who go only slightly overdrawn for a short period may pay less, but a minority of clients could pay more than £200 a month.
Alliance & Leicester (A&L)
A&L has scrapped interest charges on overdrafts and replaced them with a day by day fee. For unauthorised overdrafts, you now pay £5 a day. Before, A&Lcharged £25 on day one, followed by a second £25 fee if you remained overdrawn for a further four days, plus interest. On authorised overdrafts, the day after day fee is 50p (capped at £5 a month).
These fees will be cheaper for those who slip into the red for only a few days in the month. However, if you have an unauthorised overdraft for a full month, the fees would hit £155 - more than double the previous maximum monthly penalty charge.
First Direct
First Direct has stopped paying interest on current-account credit balances but has reduced rates on unauthorised overdrafts. Overdrafts up to £250 are interest-free; above this the rate is 12.9 per cent.
The free overdraft facility up to £250 seems like a good step but consumers who make use of this facility more than once every six months will incur an ‘arrangement fee’ of £25.
It’s also bad news for those who keep their current account in credit, and this account loses its Which? Most excellent Buy status after seven years.
Abbey
Abbey patrons who go over their overdraft limit will now be charged an ‘instant overdraft request fee’, starting at £5 for a transaction of less than £10 and going up to £35 for transactions of £30 or more (previously it charged a flat fee of £30). There is also an instant overdraft monthly fee of £25 (up from £20) and interest charged at 28.7 per cent.
Many patrons who are overdrawn for longer periods will be worse off.
A GOOD CALL?
Telephone banking can certainly be convenient, but we’re not always happy with the service offered, according to a new Which? Money survey.
Common complaints highlighted in our study include not being able to speak to someone in your local branch, long-winded lists of options to choose from when calling and the amount of time it takes to get through to a human being. On the positive side, most people in our survey said they were satisfied with the overall telephone banking service they received from their bank.
WINNERS AND LOSERS
Fifty four per cent of respondents in our survey were very satisfied with their bank’s telephone service, while only 9 per cent said they were dissatisfied.
Telephone banking pioneer First Direct stood out for the right reasons. An impressive 90 per cent of its regulars were very satisfied with the service it provided. Its staff were seen as cooperative and knowledgeable and able to respond pithily to queries. ‘They’re always pleasant and ready to help,’ one member said. An alternative told us: `They always answer the phone momentarily, sort out what I want without fuss and never try to sell me stuff I don’t want.’
It’s a shame, in light of these findings, that First Direct has subsequently slashed the interest rate it pays on current account credit balances from 2 per cent to 0 per cent (see p15). This move has lost First Direct its long-held Which? Unsurpassed Buy status.
The big banks weren’t able to match this level of service. Overall, only 41 per cent of regulars of the big four (Barclays, HSBC, Lloyds TSB and NatWest) were very satisfied. Patrons of Lloyds TSB and Barclays were the smallest likely to be very satisfied. One member said: ‘There are too many buttons to press before you get a real person and then it’s not always easy to get through what you want.’ Another said: ‘It takes forever to go through the menus and then when you actually end up with a person you have to give all the same information again!’