There is some good news however, as the bank is introducing a £12 buffer, so that if you go overdrawn up to this amount, you won’t incur any fees. Customers will also have a ‘grace period’ each day so if they dip into their overdraft they have until 4pm to pay into their account to reduce or avoid paying overdraft charges.
Liz Chang, director of banking at Santander, said; “By charging no fees on overdrafts of £12 or less and giving customers time each day to return their account to an arranged overdrawn or credit position, we are helping them to manage those occasions where they are only a few pounds overdrawn.”
Here, we take a closer look at exactly what the changes mean for Santander’s 5 million current account customers…
Increased overdraft fees
The daily arranged overdraft fee is increasing from 50p to £1 on Santander’s Preferred and Everyday Current accounts. These will be capped at 10 days per statement period for the Preferred Current Account and 20 days per statement period for the Everyday Current Account, so that the maximum monthly charges you will incur for going overdrawn will be £10 and £20 respectively.
Daily fees do not apply to the bank’s Zero Current Account, but the equivalent annual rate (EAR), which is the overdraft interest rate charged on this account, will rise from 13.9 % to 18.9% from April 16.
Despite the increased charges, the bank claims that its charges are “competitive and in line with the market.”
For anyone considering opening a Santander current account, the Preferred account still offers a free overdraft of up to £2,500, depending on circumstances, for the first 12 months.
The bank also pays a generous £100 cashback when you switch your main account to Santander. You get a £30 Amazon Gift Certificate on top of this if you open an account via MoneySupermarket before February 12.
How the charges compare
Santander isn’t the first bank to charge £1 a day to go overdrawn. Halifax already charges this much on its Reward account if you use an agreed overdraft up to £2,500, and £2 per day to customers who go overdrawn by more than £2,500.
However, as long as you pay at least £1,000 a month into your account, the Reward account pays you £5 monthly, meaning you can effectively be overdrawn for five days and it won’t cost you anything.
Lloyds TSB’s current accounts charge a monthly £5 ‘Overdraft Usage Fee’ to anyone who goes overdrawn by more than £10, and you will also be charged interest at an EAR of 19.9% on your overdraft.
Lloyds operates a similar ‘grace period’ to the one Santander will introduce in March, except that customers must pay money into their accounts by 3.30pm on the day they go overdrawn if they want to avoid or reduce their overdraft charges.
First Direct and The Co-Operative Bank currently offer some of the most generous overdraft buffers, at £250 and £200 respectively. Both charge EARs of 15.9% on agreed overdrafts which exceed these buffers.
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