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HBOS overdraft fees criticised

By Bob Howard

HBOS logo
HBOS is changing its overdraft charges

A change to the way customers of Halifax and Bank of Scotland will pay for an overdraft has come under fire from the consumer watchdog Which?

Most customers with an authorised overdraft will pay £1 a day whilst those whose overdrafts are unauthorized will pay £5 per day from 6 December.

HBOS says the change will make its charges simpler for customers.

But Which? says anyone who regularly uses their overdraft facility will see a big hike in charges.

Radio 4's Money Box programme has calculated anyone with an overdraft below £1872 is going to be worse off as a result.

The move will affect all customers with an overdraft facility on their account except students.

Flat rate fee

At the moment customers pay a daily interest charge on their current account overdrafts. The change will mean anyone with an authorized overdraft up to and including £2500 will pay £1 a day in overdraft fees.

If you're overdrawn by £100, a £1 a day charge is equivalent to 365% APR
Dominic Lindley, Which?

Those with overdrafts over £2500 will pay £2 a day.

Nicola Henderson from Leeds is one HBOS customer who will be affected. At the moment she only pays a few pounds a month in interest charges on her overdraft, but she fears that is about to change, as she told Radio 4's Money Box:

"I was really annoyed when I got the letter. It's a massive increase. At the moment I pay roughly £1.50 in interest charges a month. This will probably change to between £10-£14."

Customers worse off

HBOS customer, Reverend Tim Smith from Plymouth is also angry:

"The change in our case goes from a fee of 24 pence a month to a fee of £12. It seems totally wrong."

Which?'s personal finance campaigner, Dominic Lindley, believes the move will have an impact on many customers:

"This is bad news for any Halifax and Bank of Scotland customers who regularly use their overdraft as it's effectively a big hike in charges. If you're overdrawn by £100, a £1 a day charge is equivalent to 365% APR."

He advised customers unhappy with the change to consider switching bank:

"Anyone who's unhappy with the new charging structure should vote with their feet by shopping around and switching to a current account that best suits their needs."

Clearer charges

HBOS defended the move. A spokesperson said:

"We believe the introduction of this charging structure is the right thing for our current account customers.

The vast majority of our customers don't use their overdraft facility in an average month and those that do only go overdrawn for a few days usually at the end of the month."

Money Box



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