Co-operative Bank halts agreed overdraft charges
Tuesday 03 January 2012
The Co-operative Bank is scrapping interest charges on agreed overdrafts for the next three months, in a move which it said would help customers struggling after Christmas and shake up competition.
A current account customer with an agreed overdraft of £2,000 could save £75 in fees over the "interest free" period.
The bank said customers will automatically have the interest charges put on hold on the overdrafts which qualify and they will not be asked at any point to pay the interest which would have accrued.
Robin Taylor, head of banking at the Co-operative Bank said: "This move again highlights how we are looking to bring some much-needed competition to the high street, by providing customers with a genuine alternative to the big five banks."
The offer applies to agreed "formal" overdrafts, where a customer has requested an overdraft service in advance, and this has been agreed.
It includes standard overdrafts provided with the Current Account Plus as well as formal overdrafts with the Privilege, Privilege Premier and smilemore accounts.
But it excludes Cashminder and Student accounts, Business banking and Corporate banking current accounts.
The interest free overdraft period covers debit balances from January 5 to April 4 inclusive and any account still overdrawn after this date will revert to the usual charges.
Any customer who applies for and receives a formal overdraft while the offer is running will also pay no interest on agreed debit balances from when their overdraft is set up until April 4.
A formal overdraft lasts for 12 months and the bank charges £20 to set up or renew it.
The Co-operative Bank said its research showed the typical British adult built up just over £749 of debt last year.
Just over a quarter (27%) of those who accumulated debt in 2011 expect to pay it all back in the next 12 months, with an additional quarter expecting to pay back half or more (26%).
But just under a third of consumers (29%) expect to pay back less than half and just over one in 10 (12%) do not expect to pay any of their 2011 debts off this year.
The most common forms of borrowing last year were on credit cards, through personal loans and arranged overdrafts.
But 7% of borrowers used store cards and 5% took out payday loans, according to the survey of 2009 adults.
Mr Taylor said: "Many people review their finances at the start of the year. As a responsible lender, we want to encourage customers to take control of their finances by providing them with the additional leeway to begin tackling any debts."
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