Jump to content


A&L ends interest on overdrafts


crfx250
 Share

style="text-align: center;">  

Thread Locked

because no one has posted on it for the last 5363 days.

If you need to add something to this thread then

 

Please click the "Report " link

 

at the bottom of one of the posts.

 

If you want to post a new story then

Please

Start your own new thread

That way you will attract more attention to your story and get more visitors and more help 

 

Thanks

Recommended Posts

Another day, another headline grabbing ''cut''...

 

 

 

 

Bank ends interest on overdrafts

 

_44114497_allianceleicesterbbc203.jpg Customers may pay more if they stay in the red a long time

 

The Alliance & Leicester is to stop charging any interest at all on overdrafts run up by its current account customers.

 

A new set of daily fees will be introduced, while its charge for bouncing a cheque is to be reduced to £25 from £34.

 

The new policy, which starts from 22 October, is part of a simplification of the bank's overdraft charges.

The A&L said it would keep free banking for customers who stay in credit.

 

"The combination of fees and interest is unnecessarily complex when you are trying to present your business as simple," said the bank's head of current accounts, Andy Bayes.

 

Free banking?

 

The future of so-called free banking has been cast in doubt by two investigations being carried out in parallel by the Office of Fair Trading (OFT), and by the impending High Court test case between the OFT and seven banks and one building society.

 

It has been widely claimed that if banks are eventually forced to slash their charges for running up an unauthorised overdraft then they might bring in other charges instead - for instance per item or per month - just for running an account, and for customers who stay in credit.

 

Although this has not yet happened, Lloyds TSB has already changed its overdraft fees, and other banks are likely to do the same before the end of the year.

But the Alliance & Leicester denied that its move had been provoked by the OFT's current investigations.

"This started before any of that took off," said Mr Bayes.

 

New tariff

 

Up to now, customers using an authorised overdraft at the Alliance & Leicester paid interest of between 6% and 17% each month.

That will be replaced with a new charge of 50p a day, up to a maximum of £5 a month, regardless of the size of the overdraft.

 

Those customers who go into the red without permission currently pay interest, plus £25 on the first day and then £25 on the fifth day of their unapproved borrowing, each month.

Those charges are being done away with and are being replaced with a single charge of £5 a day while the overdraft continues.

 

This will expose some customers to much higher charges if they stay in the red for a long time without permission.

"Customers should ask themselves whether the new simplified fee structure does actually save them money in the long-term," said Kevin Mountford of the price comparison website Moneysupermarket.com.

"According to our analysis, the new way of charging will result in Alliance & Leicester customers being marginally better off."

The bank says that people who go overdrawn without permission can ask instead for an approved overdraft to escape the charges.

And in any case, it argues, most people who end up in this position pay money into their accounts to restore their balance within seven days.

 

Bouncing cheques

 

The Alliance & Leicester's charge for agreeing to pay a cheque, direct debit, or standing order while overdrawn without permission will stay at £25 each time it happens.

But the charge for refusing to make the payment while in the red - bouncing a cheque - will be reduced to £25 from the existing £34.

"For us, at best, this is cost neutral," said Mr Bayes.

"But we expect to see some correction of behaviour, as for some this is an incentive to take action." Earlier this month the much larger Lloyds TSB banks revamped its overdraft charges. Interest rates for unauthorised borrowing will be cut by about a third, while charges for going into the red, or bouncing a cheque, will also be reduced.

Link to post
Share on other sites

It seems to me that the current trend of re-structuring overdraft charges has little to do with the OFT test case but a move to combat the OFT's long investigation into bank charges due to finish in a couple of months.

 

Just when the OFT is dotting the i's and crossing the t's the banks throw in a

completely new set of numbers rendering all the calculations the OFT

has been working on since April, out of date.

Link to post
Share on other sites

 Share

  • Recently Browsing   0 Caggers

    • No registered users viewing this page.

  • Have we helped you ...?


×
×
  • Create New...