MoneyHelpline logo

Latest news from

13 December 2017: Overdrafts: Latest news on charges and alternatives to overdrafts

There has recently been calls for banks to end charges placed on unauthorised overdrafts.

Thousands of people are finding that as they fall into their overdraft, it is becoming impossible to get back out due to extra charges stamped on top of what needs to be re payed.

This means many are in a circle of debt, and banks are now being asked to give more support to those who have been trapped by their charges.

Although there are now caps where banks have had to publish maximum monthly charge since September 17, many want charges to be completely abolished to prevent people being stuck in debt in the first place.

It has been said that banks fail to help their customers even when they admit to being in debt.

Lloyds is the only bank to have already abolished charges for unauthorised overdrafts.

Some banks claim to not let their customers get unauthorised overdrafts, yet they can still apply for emergency lending, which would put them in the same dangerous position. The majority of other banks do still offer unauthorised overdrafts however.
The Financial Conduct Authority (FCA) said it was considering a ban on charges for unplanned overdrafts - but it is not due to report until 2018.

Many people in their overdrafts use them to pay off expensive bills or similar and so end up completely stuck.

There is also the claim that banks will give customers huge overdrafts which they could never afford, instead of setting them a sensible limit. Overdrafts can be one of the most expensive ways to borrow money.

However, there are alternatives to having an overdraft…

Firstly, shopping around bank accounts to see who offers the better rate overdraft is a good idea. You’d be surprised at how much changing banks makes a difference. Some even have a fee-free overdraft buffer up to a couple of hundred pounds. This compared to an account which charges a daily fee and sometimes also interest could save you a huge amount monthly.

Compare bank accounts here to see if you could be charged less on your overdraft

If you want to stay away from overdrafts completely, but you definitely need extra money ASAP, then you could go for a good rate personal loan. They’re often much cheaper than overdraft charges, but these tend to be better for borrowing slightly larger amounts as this gets the cheapest rates.

Compare loans here to see if it could be cheaper than your overdraft

Another option to borrow money fast would be to get a 0% purchases credit card. This will give you free borrowing for a certain amount of time. However, you must be able to pay this off before the 0% time period ends, or you will be hit with high credit card interest rates.

You can also transfers debts on a credit card across to a 0% balance transfer card. This keeps any debt interest free for a certain time period, giving you longer to pay it off before it starts to increase.

Compare 0% credit cards here and see how they could benefit you

Show all
©2005 - 2018 Terms and conditions About us Contact us Affiliates Press Office Privacy Policy About cookies
Agent: fri