HSBC will hike its overdraft charges to almost 40 per cent for all of its customers, in a move the high street bank said will make its fees “easier to understand”.
The bank said the single rate of 39.9 per cent will come into force from 14 March next year for its eight million UK customers.
Its fees currently range between 9.9 per cent to 19.9 per cent on arranged overdrafts.
The move follows a similar hike from Nationwide Building Society in the summer. Analysts expect other banks to introduce similar rises, fearing it will be “the new normal” for overdrafts.
‘dysfunctional’ overdraft charges
HSBC added it is removing a £5 daily fee for going into an unarranged overdraft and will introduce an interest-free £25 buffer on its Bank Accounts and Advance Bank Accounts, providing leeway for those going slightly overdrawn. The charge will not apply to student accounts.
The high street lender said the removal of the £5 daily fee for unarranged overdrafts, will mean seven in 10 who use an overdraft would be better off, or see no difference, as a result of the new policy.
The move comes ahead of the Financial Conduct Authority’s (FCA) bid to clamp down on “dysfunctional” and complex bank overdraft charges.
The city regulator will impose new rules next April, that will require providers to charge a simple annual interest rate on all overdrafts and get rid of fixed fees.
Nationwide unveiled a new single rate of 39.9 per cent across its adult current accounts in July. Its changes came into force in November.
MoneySavingExpert.com banking editor Helen Saxon said: “Both of the first two current account providers to announce changes have moved overdraft interest rates to around 40 per cent. We now have to wonder if this is the new normal.
She added: “It’s a definite step forward to cut punishing overlimit fees and to make overdraft costs more transparent. But this change will actually make most people who are in their arranged overdraft, and who owe more than £25, worse off – whichever HSBC account they hold.”
Rachel Springall, a finance expert at Moneyfacts.co.uk, said: “It’s disappointing to see such a hike in overdraft charges, but there may be more brands coming out in the coming weeks to announce changes too.”
But HSBC UK’s head of lending and payments Madhu Kejriwal said: “By simplifying our overdraft charging structure, we are making them easier to understand, more transparent and giving customers tools to help them make better financial decisions.”
He added: “The new £25 buffer we are introducing will also give people some peace of mind that a small miscalculation on spending won’t incur overdraft charges.”
The FCA said banks collected £2.4bn in revenue from overdrafts in 2017, with around 30 per cent coming from unarranged overdraft fees. It added about 19 million people use an arranged overdraft every year, around 14 million use an unarranged overdraft, while 7.3 million use both types of overdraft in a year.