Lloyds currently charges customers who go into an arranged overdraft a fee of 1p for every £7 they go overdrawn – a system it only introduced last November.
But now it's shaking up its overdrafts again by introducing three different charging structures based on how much you go overdrawn by.
The change will see those who go overdrawn by up to £1,250 paying more than they do at present.
Here's what's happening:
- Go overdrawn by up to £1,250: you'll be charged 1p for every £6
- Go overdrawn by £1,250.1 to £2,500: you'll be charged 1p for every £6 up to £1,250, then 1p for every £7 after that
- Go overdrawn by £2,500.1: you'll be charged 1p for every £6 up to £1,250, then 1p for every £7 between £1,250.1 and £2,500, and 1p for every £8 above £2,500
The change comes into force from January 14 for all customers.
We've asked Lloyds how many customers will be negatively impacted by the change and we'll update this story as soon as we get a response.
Lloyds says customers with unarranged overdrafts will continue to pay no fees.
How to cut overdraft costs
- Start budgeting – it sounds simple but if you cut out unecessary spending you should find you don't need to dip into your overdraft as much.
- Talk to your bank – if you tell your bank you're struggling it might help you to come up with more manageble repayments or freeze the interest for a period.
- Shift your debt onto a money transfer credit card – here you use the card to repay your overdraft, meaning you end up owing the card instead. These often have long 0 per cent interest periods giving you time to repay the cash.
- Move bank account – use comparison tools to check if another bank has a cheaper overdraft you could switch to.
A spokesperson Lloyds Banking Group said: “We are now, as part of the regular review of our current accounts, writing to a number of customers to inform them of an update to the costs of their arranged overdrafts from January 2019.
"Our customers continue to benefit from our approach, with overdraft costs remaining simple and transparent.
"Lloyds Bank, Halifax and Bank of Scotland are the only banks where customers do not pay unarranged fees.
"Customers automatically get text message alerts when they are close to their overdraft and are charged daily, not weeks later."
How to get help for free
- Citizens Advice – 0808 800 9060
- StepChange – 0800 138 1111
- National Debtline – 0808 808 4000
You can also find information about Debt Management Plans (DMP) and Individual Voluntary Arrangements (IVA) on the Money Advice Service website and on the Government's Gov.uk site.
Speak to one of these organisations – don't be tempted to use a claims managment firm that will claim it can write-off lots of your debts in return for a large up-front fee.
If you're unsure how overdrafts work, check out our guide to what is an overdraft, how do charges work and what are the advantages and disadvantages of having one?
Recent research found that high street banks charge hundreds of pounds more in overdraft fees than digital banks.
Banks could be banned from charging higher fees for unarranged overdrafts in a crackdown on high-cost credit by the financial regulator.
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