The banks have done it again. This coming fall, customers of major UK banks will get slammed with higher overdraft charges. And other banks may soon jump on the bandwagon.
In addition to the growing interest rates on overdrafts, customers of certain banks will see the flat fee on overdraft arrangements increase, too — from £5 to £6 per month. Financial experts are concerned this may be the early stages of an overarching trend that other banks will soon follow — which means changing current accounts or switching banks won’t necessarily fix the problem. If you dip into unauthorised overdraft territory, starting in October you will have to pay more money.
However, the bank has attempted to offset the higher rates by increasing interest- and fee-free amounts on authorised overdrafts. This means you’ll have a bit more leeway with how much money you’re able to overdraw before the charges begin. But the bottom line is clear: If you need to go into the red, most overdrafts are going to start costing you more.
Fortunately, there are steps you can take to avoid bank overdraft fees altogether, such as these listed below.
- Balance your chequebook often. Keep tabs on your current account so that you’ll know the balance while you’re out shopping. If you know how much you have, you won’t overspend.
- Make a budget. By planning your monthly expenses ahead of time and minimising impulse buys day-to-day, you prevent yourself from accidentally dipping too far into your current account later on.
- Compare costs. In some cases, the interest rate on overdrafts may be more expensive than a late fee, credit card or personal loan. If an overdraft fee seems necessary to get all the bills paid, weigh your options first. Compare the overall costs of other forms of credit before opting for the overdraft.