Nationwide hikes overdraft fees by up to £73 a year for millions from today – how to avoid it
FROM today, Nationwide is hiking overdraft charges by up to £73 a year, affecting millions of current account holders.
The changes will affect customers with 'arranged overdrafts' where you agree how much money you can borrow from your bank each month.
From now on, all of Nationwide's adult current account holders will be charged a flat rate of 39.9 per cent on any overdraft borrowing.
For FlexAccount holders this is more than double the 18.9 per cent they were previously charged.
Nationwide is also removing the £250 fee-free buffer offered on the FlexPlus account.
Unarranged overdrafts (where you accidentally spend money you don't have) will be scrapped entirely, so if you don't have an arranged overdraft and you don't have enough cash in your account - you simply won't be able to pay.
The impact on Nationwide customers will depend on which current account they have, how they use their overdraft facility and how often they dip into it.
For instance an APR of 39.9 per cent is equivalent to 46p a day if you borrow £500.
FlexDirect customers had been paying 50p a day, so if they're borrowing less than £500 they'll actually be better off under the new rules.
FlexPlus customers were also paying 50p a day, but they also had a £250 fee-free buffer that has now been removed, so if you have that kind of account you're likely to be slightly worse off overall.
Nationwide can't pinpoint the exact number of customers that will be affected, but it has said that approximately 800,000 people access an overdraft each month.
It says that most of the people who do see an increase in costs will only see a rise of 20p or less.
How to cut down your overdraft costs
THERE are a few ways to cut overdraft costs, and which suits you will depend on your situation. Here are a few options advised by MoneySavingExpert:
Spend less each month – do a proper budget and have a look at what you’re spending on.
Could you cut your morning coffee, or go down a brand at the supermarket?
Or, are you paying too much on your bills – if you haven’t switched energy, insurance and broadband recently, then it’s likely you could save £100s or even £1,000s over a year.
Move your bills – this can be dangerous if you’re not disciplined, but if you move your bills to just before payday rather than just after, many will be in credit (or less in the red) for less of the month, meaning you’re charged less for the overdraft. But – remember those bills are coming out, so don’t treat it like you’ve extra money to spend.
Shift your overdraft on to a money transfer card – and don’t build it back up again.
Try setting up "pots" - sort your cash at the start of each month, so you have a bills pot, a spending pot etc. Use this technique to make payments to your overdraft, eg £100 a month, treating it like any other bill.
There are a small proportion of account holders who borrow higher amounts frequently who could see themselves paying substantially more.
Nationwide contacted all its customers in August to notify them of the change.
It has also been specking to customers that will be impacted the most to discuss their circumstances and help them explore alternative borrowing options.
The bank is also introducing a repayment loan for those in financial difficulties.
The reason for the changes is new rules from the financial watchdog designed to stop banks charging expensive unplanned overdraft fees.
The ruling means that all banks will have to change the way their current account overdrafts work by April next year.
That means every person in the country who has an overdraft will see similar changes at their own banks too.
No other bank has announced its new flat rate overdraft interest rate yet, but we know the changes will happen over the next six months.
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