HSBC customers in the red will see their overdraft interest rate more than DOUBLE to almost 40% from March
- Currently HSBC account holders usually pay between 11.9% and 19.9%
- This means customers of its three most popular accounts will see big hikes
- The moves make HSBC the second bank to comply with new overdraft rules
- These require banks to price overdrafts using a simple percentage
- Meanwhile extra unarranged borrowing costs have also been scrapped
HSBC has announced that customers who dip into the red will be charged a flat 39.9 per cent interest rate from next March, with some bank account holders seeing their fees trebled under the changes.
Its customers currently pay between 11.9 per cent and 19.9 per cent when they use their arranged overdraft, meaning all customers will see substantial increases on their borrowing costs next year.
The announcement makes the bank the second major High Street lender after Nationwide to change its overdraft arrangements after regulator the FCA changed the rules on overdrafts.
HSBC will impose a single overdraft rate of 39.9% on customers from March next year
The UK’s largest building society’s changes came into force last month and saw it hike overdraft costs across the board also to 39.9 per cent.
One commentator said the latest announcement suggests that very high interest rates for balances in the red will become standard.
Andrew Hagger, founder of personal finance site Moneycomms, said: ‘Paying almost 40 per cent for agreed overdrafts looks like becoming the norm even if you have a top notch credit record, double the rate on credit cards.
‘Surely this isn’t the outcome the regulator was expecting?
‘Some of the big banks still haven’t shown their hands but the early signs are that those using agreed overdrafts will be paying a much higher price and absorbing the costs the banks used to impose on unauthorised overdraft borrowing.’
Under the new rules, which overdraft providers must comply with by 6 April next year, require overdrafts to be priced using a flat interest rate and ban lenders from charging more for unarranged borrowing.
However, there is no requirement for providers to charge more, with both Nationwide and now HSBC hiking the costs for borrowers. HSBC claims seven out of 10 overdraft users will pay the same or less than they do now.
Currently, HSBC Basic customers paid 19.9 per cent, Advance customers 17.9 per cent and Premier customers 11.9 per cent.
Advance customers also benefit from a £10 interest-free buffer and Premier customers one worth £500. Neither of these are being scrapped, with Advance and Basic customers each getting a £25 fee-free buffer from next March.
The biggest winners under the changes are, unsurprisingly, those who often find themselves in their unarranged overdraft. The bank at the moment charges a £5 daily fee for every day you are in the red, capped at £80 a month.
That £5 fee will be scrapped from next year, with the cost of borrowing for all customers capped at £20 a month.
The bank also said it would send customers text message alerts when they were about to go into their overdrafts. The news comes just a week after the bank was fined £8million for failing to do exactly that in the cases of 115,000 current account holders.
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