Overdraft fees will be simpler but not necessarily cheaper
Millions of customers with the Halifax and Bank of Scotland will see big changes to their current accounts in the New Year.
The standard set of overdraft fees, including interest charges, will be replaced by daily fees of £1, £2 or £5 when people are in the red.
The charges will start with the launch of a new account on 9 February 2009.
But most existing accounts will be moved to the new charging structure later in the year.
The changes are a response to last July's critical report by the Office of Fair Trading (OFT) into the operation of personal current accounts.
The report said that the way they worked was complex and opaque, with many customers not knowing how much they were likely to be charged in interest and overdraft fees.
"It will reward good behaviour and is really simple and easy to understand" said a Halifax spokesman abut the new charging structure.
He denied it was part of any preparation by the bank in case it, along with seven other lenders, eventually lost their current High Court test case on the fairness of overdraft charges.
"This is nothing to do with the High Court bank charges case," he stressed.
"This is still free in-credit banking - you can still pay nothing and get £5 per month after tax," he added.
The new account, dubbed the "Reward" account, will abolish the current interest charges for people in the red.
Also disappearing will be the existing overdraft fee of £28 per month, and the maximum three charges a day of £35 each for paying or bouncing cheques, or making other payments, while in the red without permission.
Instead, customers with an arranged overdraft of up to £2,500 will pay £1 per day; those with a higher arranged overdraft will be charged £2 per day; and anyone with an unarranged overdraft will have to pay £5 per day.
The new account will also be credited with a standard after-tax interest payment of £5 per month, regardless of how much is in the account, so long as at least £1,000 a month has been paid in by the account holder, and regardless of whether the account then goes into the red or not.
As part of the transition process, the Halifax will move people who still operate its now closed "Moneyback" account to the new format in February.
It will also close its ordinary and high interest current accounts to new applicants.
Its new account, alongside its more elaborate "Ultimate Reward" account, which comes with a £12.50 a month fee, will become the standard offering.
The bank's student and basic accounts will still be available and, for the time being, will not be included in the changes.
But the "Ultimate reward" account will also feature the new overdraft charges in due course, and Halifax customers will be able to switch their existing ordinary and high interest accounts to the new set-up if they wish.