MILLIONS of Lloyds Banking Group customers are facing a rise in overdraft fees from today.
In August, the bank announced a huge shake-up of interest rates on overdrafts for Lloyds, Halifax and Bank of Scotland customers.
It said some customers would see rates go down to 19.9% or 29.9% and some may see them go up, as it was assessing everyone individually.
Customers on Club Lloyds had a preferential rate of 27.5% scrapped and were moved on to a new rate, depending on their credit history.
While millions of other customers who are not part of the scheme also saw their overdraft rate change.
As a way to ease in the measures, it introduced temporary rates or 34.9% and 44.9% for rates that were going up.
But from today, customers whose interest rates increased to 34.9% will see their interest rate charge rise again to 39.9%.
While those on 44.9% would see theirs rise to 49.9%.
Despite these changes, the majority of customers with Lloyds, Halifax, and Bank of Scotland remain on the standard 39.9% rate.
When these changes were first announced, the banking giant said that most customers would pay the same or less.
If you’ve been moved onto the highest rate, it’s worth having a shop around to see if you can get a better deal elsewhere.
An overdraft allows you to spend money or withdraw cash even if your account balance falls below £0.
[bc_video account_id=”5067014667001″ application_id=”” aspect_ratio=”16:9″ autoplay=”” caption=”CARD REFUNDS: Section 75 versus Chargeback” embed=”in-page” experience_id=”” height=”100%” language_detection=”” max_height=”360px” max_width=”640px” min_width=”0px” mute=”” padding_top=”56%” picture_in_picture=”” player_id=”default” playlist_id=”” playsinline=”” sizing=”responsive” video_id=”6357849129112″ video_ids=”” width=”640px”] [authenticated-scripts src=”%3Cscript%20class%3D%22palin-poll%22%20src%3D%22https%3A%2F%2Fwww.thesun.co.uk%2Fpollingwidgets%2Fv3%2Fwidget.js%3Fquestion_id%3D104820%26game%3Dpolling%22%3E%3C%2Fscript%3E” type=”embedded” width=”100″ /]However, you may be charged interest on the amount you go over your limit.
The interest rate you’re charged depends on your account type and an “affordability check,” which considers your credit history.
You can check what most banks are charging for their overdraft by visiting Moneyfactscompare.co.uk.
Five banks currently offer interest-free buffers with their overdrafts.
This means they won’t charge interest on your debt until your borrowing exceeds a certain amount.
For example, First Direct offers a £250 interest-free buffer and Nationwide recently extended its own from 1p to £50.
[boxout headline=”Think before you borrow” intro=”BORROWING sounds like a simple way to help pay bills – but beware falling into debt you cannot pay back.”]It’s always vital to ask yourself if you actually need to borrow before committing to a new credit card, personal loan or overdraft.
If you cannot afford to pay off debt you already have, you should avoid at all costs taking on any more.
What are the alternatives to overdrafts?
Depending on individual circumstances, some borrowers may find it more cost-effective to use alternatives to an overdraft, such as a credit card with a 0% interest period.
These credit cards allow you to move more expensive debts you already owe on to a new card, and you won’t pay interest on this amount for a set period.
For example, Barclaycard is currently offering no interest for up to 32 months on its balance transfer cards.
Some people may also have savings they could turn to, rather than to help clear their debt.
Ideally, you will have built up an emergency fund which you can dip into — but sometimes that just isn’t possible.
Before you borrow cash, do your research and find out the cheapest option for you.
And remember to speak to your bank as lenders must help if you’re in financial difficulty.
If you are looking for a cheaper way to borrow, it’s also worth considering a loan from a credit union.
They are a much cheaper alternative to payday loans, and some can even get cash to you on the same day.
The interest rate offered on these loans is substantially lower than that offered on a credit card or overdraft.
Interest ranges from 12.7 per cent APR (one per cent a month) to a maximum capped rate of 42.6 per cent APR (3.5 per cent a month).
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