Barclays overdraft fees change today: will you pay more?
BARCLAYS customers could be charged new overdraft fees from today, three months after controversial new charges were announced, and much to the dismay of the bank's five million customers.
Some will see their monthly fees soar up by 184% under the new system.
Like many banks, Barclays are scrapping their 19.3% EAR interest rate and replacing it with daily fees and charges for bounced payments.
Those that are overdrawn throughout most of the month will be worst hit.
Winners and losers
Barclays claims that 70% of their customers will be better off after these the changes, which replace a 19.3% EAR interest rate with a daily charge of between 75p and £3.
Customers that will benefit from the new fees structure are:
- Those just dipping into their overdraft by a few pounds, because Barclays is offering a £15 'buffer' free of charge, and
- those exceeding their overdraft limit for more than six consecutive working days, because the maximum penalty has been cut from £100 a month to just £35.
So far, so good. Unfortunately, that's where the benefits end.
The other 30% of customers - the equivalent of over 1.5 million people - will lose out.
Dear @Barclays how do you justify increasing my overdraft rate from 14.9% to 456% on a £60 overdraft?- Michael Harris (@mjrharris) June 11, 2014
Anyone that spends the majority of their time in the red will see a huge difference to the amount they pay for the privilege of an authorised overdraft.
For example, a Barclays customer that consistently holds an overdraft balance of £500 would previously have paid £97 to borrow over the course of a year. Now, that's soared to a staggering £274.
Those deeper into their overdraft, with a £1,001 average monthly balance, will see their costs increase from £193 to £548 a year.
And that's not the worst of it. The maximum any one customer could pay in a single 12 month period from today is £1,095. Previously, it would have cost just £386 so that's a 184% increase.
Overdrafts as legal loan sharks
Consumer groups have long complained that some overdrafts are almost as expensive as payday loans.
Many payday lenders charge around £25 to borrow £100 for a month, and Barclays new overdraft charges aren't a million miles away.
Yesterday, a Barclays bank account customer borrowing £100 would have paid £1.58 in interest over a 30 day period. Today, the same level of borrowing costs £22.50.
Customer feedback to blame
Despite initial feedback being somewhat negative when the overhaul of overdrafts was first announced at the end of March, Barclays pressed on.
The bank still insists that the new system is easier for customers to understand. Managing director of Barclays Retail, Catherine McGrath, said that customers have told them "it is too hard to calculate the cost of borrowing".
This may well be true. Certainly, the fee structure is clearer when working out the fees due each day:
- £0 to £15: free.
- Up to £1,000: 75p a day.
- Up to £2,000: £1.50 a day.
- Over £2,000: £3 a day.
However, those borrowing through an unauthorised overdraft will pay £5 a day but with a limit of £35 a month and fees are still due when a transaction bounces, £8 for each unpaid transaction and up to £40 a day.
That's less easy to work out.
Moreover, by focusing on the 70% of customers that will either benefit or remain unaffected by the changes, Barclays has not addressed the huge increase in costs for people regularly in their overdraft.
Speaking to The Telegraph, Ms McGrath said that the changes would improve customer relations with Barclays. "It will make them less likely to leave," she said.
Ms McGrath is obviously not on Twitter.