Some overdrafts going up by 5% and current account fees by £24 as experts warn other banks may follow suit
Customers of Lloyds TSB and Bank of Scotland will be hit by increased overdraft fees from October, following a similar move from Halifax, part of the same banking group.
From 2 October customers of both Lloyds TSB and BoS will see the interest rate on their overdraft increase by as much as 5%, while the annual fees some customers pay for their current accounts will rise by up to £24 a year.
Hardest hit will be customers of Bank of Scotland’s most expensive current account, Premier, who will pay overdraft interest of 15.43%, up from 10.43%. This means someone who is overdrawn permanently by £3,000 will pay £462.90 a year in interest, £150 more than currently. Both banks, which operate as part of the Lloyds Banking Group, will increase rates for those with their fee-free Classic current account from 19.28% to 19.94%.
Interest rates will increase on all other paid-for accounts, while Bank of Scotland Silver account holders will see the monthly fee they pay for the account increase from £7.95 to £9.95. Both banks will increase their monthly overdraft usage fee from £5 to £6.
The banks are also introducing or increasing interest and fee-free overdraft amounts on their current accounts for those who apply and are approved. These include a £25 buffer for Classic customers and £50 for Silver holders.
“It’s not surprising that we’re seeing banks’ lending rates go up as their balance sheets are increasingly squeezed,” said Kevin Mountford, banking spokesman for moneysupermarket.com. “Other bank customers should watch out – often when one bank moves, another swiftly follows.”
Other overdraft increases have already been announced. From 2 November Halifax will increase rates for those who are £2,000 or more overdrawn and, from 6 August, Smile will increase its overdraft rates while cutting its current account interest rate to zero.
“Although the rate increases may be small in some cases, it’s the collective effect of such rises combined with other increasing costs that will impact on already squeezed household budgets,” said Mountford.
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