Will the FCA tell banks to slash overdraft charges?
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Christmas is coming! Don’t get caught out by overdraft fees and charges this festive season.
The countdown to Christmas and all the spending that goes with it is well and truly underway. For many people, this means dipping into an overdraft to make ends meet over the festive season. But, at what cost?
Recent news reports have suggested that how much your overdraft will actually cost you is often unclear. The details are often in amongst all the other facts and figures in the paperwork you received about your account when you opened it. According to the article some banks are charging the equivalent of up to 36% interest for the use of an overdraft facility, and that’s an arranged overdraft (unauthorised borrowing is usually far more expensive). In other words if you had an overdraft for £500, you’d be paying back £180 a year in interest and charges on it.
That’s not a great situation to be in, especially when the report goes on to highlight that at the other end of the scale some banks charge just £19 for a similar overdraft. This being the case, it’s important that you understand just how much you’ll be paying and, crucially, whether you can get the same facility elsewhere for less.
Get the facts
So, how do you find out what you’ll be paying in interest and charges if you use your overdraft this Christmas?
All the information about how your account works and what you’ll pay in fees and charges for overdrafts should have been given to you when you opened the account. However, that could have been years ago, or you may have lost the details along the way. So, if you don’t have the details you need to hand, here are two ways to get them quickly and easily.
1. Look at your bank’s website. Just type the name of your bank and the words ‘overdraft charges’ into Google and you’ll soon find your way to the information you’re looking for. Some banks, like NatWest, even have overdraft calculators on their website. This allows you to choose which bank account you have, the amount you want to borrow, or have already borrowed, and the number of days you want it for, so you can see what you’ll be paying.
2. You can pop into your bank in person and ask to speak to someone, you can call them on the telephone, or ask on live chat if you have that facility too. And if you’re not in a hurry you could drop them an email.
Once you know how much you’re paying in charges and interest for your overdraft, you can start making some informed decisions about how you want to move forward – is your current bank giving you a good deal or would you be better moving your money somewhere else? You can find the best deals at the moment by using one of the online comparison sites, like USwitch to see if you could save some money.
So, we’re not saying don’t use your overdraft. What we are saying is make sure you know how much you’ll be paying, and prepare a plan to get yourself back into the black as soon as possible, if you do.
by Shelley BowersBack to blog home