Money Insider: Overdraft shake-up signals an end to free banking

lloyds tsb customers who make use of their agreed overdraft facility will find themselves having to stump up an additional £5 per month for the privilege from 2 December, the bank announced last week.

While the decision to reduce unauthorised borrowing charges from the same date is a welcome move from the bank, it is alarming that a chunk of this lost revenue will be recouped from customers who play by the rules and operate within their approved overdraft limit.

For many years, people have been talking about the end of free banking, and even though no bank has – or perhaps ever will – come out and said that they are going to start charging for using a current account, the number of stealth charges still continue to mount up.

Throughout the long-running bank charges saga many people feared that if unauthorised fees were deemed unfair by the courts then we'd all end up having to pay for our banking.

It didn't happen and the bank charges case may now be all but forgotten, but with the coalition Government promising to clamp down on unfair charges, it is worrying that this move from Lloyds TSB may not be the last where unauthorised charges are cut only to be passed on to the majority who manage to keep their overdraft in check.

So while you may get the basic banking package, ie ATM card, cheque book, statements and direct debits for free, we are steadily moving towards a situation where you'll have to pay for any extras.

Is it not enough that customers are faced with overdraft interest rates of between 15 per cent and 20 per cent (yes, 30 to 40 times base rate) without having to cough up an additional fee on top?

At one stage if you went into the red it was simple, you only incurred daily interest charges for being able to borrow money from your bank.

However, the introduction of "more transparent" daily overdraft fees from Halifax last December and the new £5 monthly fees from Lloyds TSB from this December means that customers need to grab their calculators and double-check that their bank account is the most cost-effective for the way they manage their money over the month. For example, Alliance and Leicester charge 50p per day (up to a maximum of £5 per month); Halifax charge £1 every day a customer is overdrawn (£2 per day over £2,500); and now Lloyds TSB is going to add its two-penn'orth of confusion courtesy of an additional monthly fee on top of any interest already payable.

There is now a worry that other banks will follow this move and introduce a monthly fee for overdrafts, too; it's certainly easier when they're not the first to do so and can claim to be making changes in line with their competitors.

With all of us having to keep closer tabs on our finances in the wake of the recent Budget and forthcoming spending cuts, the last thing consumers need is to be hit with additional costs for managing their money.

Saving rates go same way as England's World Cup campaign

Savings rates came under the spotlight again this week: it is now no longer possible to obtain a rate of 5 per cent or more on a straightforward fixed rate savings bond.

ICICI Bank UK, the long-time market leader, trimmed its rates on Tuesday to just 4.75 per cent AER for those customers looking to lock their cash away for the maximum term in order to achieve a decent monthly income.

These rates have gradually been falling from a relative high point of 5.65 per cent just nine months ago, and whilst a cut of 0.90 per cent may not sound like a huge amount, for someone with a £50,000 deposit it equates to £1,800 less interest over the five-year term, or £30 less per week after basic rate tax.

On the topic of savings bonds, it was interesting that Nationwide Building Society's Football Bond was withdrawn once England had qualified from the group stages of the World Cup.

At the time, I assumed it was part of the original terms and conditions of the product – either that or the Nationwide boys had been privy to some top class football being played by our boys behind closed doors and got a bit nervous about having to pay out a bonus on the rate. However, following the embarrassing debacle last Sunday, I can only assume that it must have been down to the former.

Andrew Hagger is a money analyst at Moneynet.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
The surrealist comedian at the Q Awards in 2010
people
News
Russell Brand arriving for the book launch in East London
peopleRussell Brand cancels his book launch debate due to concerns about the make-up of the panel
Sport
Christiano Ronaldo enjoys his opening goal
champions leagueLiverpool 0 Real Madrid 3: Ronaldo and Benzema run Reds ragged to avenge thrashing from their last visit to Anfield
Arts and Entertainment
Sir Nicholas Serota has been a feature in the Power 100 top ten since its 2002 launch
art
PROMOTED VIDEO
Arts and Entertainment
Awesome foursome: Sam Smith shows off his awards
music22-year-old confirms he is 2014’s breakout British music success
Life and Style
Six of the 76 Goats' cheese samples contained a significant amount of sheep's cheese
food + drink
Arts and Entertainment
Contestants during this summer's Celebrity Big Brother grand finale
tvBroadcaster attempts to change its image following sale to American media group
Extras
indybest
Arts and Entertainment
Sarah Dales attempts to sell British Breeze in the luxury scent task
tvReview: 'Apprentice' candidate on the verge of tears as they were ejected from the boardroom
News
Call me Superman: one of many unusual names chosen by Chinese students
newsChinese state TV offers advice for citizens picking a Western moniker
News
Wilko Johnson is currently on his farewell tour
people
Voices
New look: Zellweger at Elle's Women in Hollywood awards on Monday
voicesRenée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity, says Amanda Hess
News
Let’s pretend: KidZania in Tokyo
educationKidZania lets children try their hands at being a firefighter, doctor or factory worker for the day
Life and Style
CHARGE BOOSTER: Aeroplane mode doesn't sound very exciting, but it can be a (phone) hacker's friend. Turning on the option while charging your mobile will increase the speed at which your phone battery charges
techNew book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone
Arts and Entertainment
Julianne Moore and Ellen Page are starring together in civil rights drama Freeheld
film
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

    Trainee Recruitment Consultant Birmingham

    £18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

    Trainee Recruitment Consultants

    £20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

    Day In a Page

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
    Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

    'Renée Zellweger's real crime was to age'

    The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
    From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

    Disney plans live-action remakes of animated classics

    From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
    Thousands of teenagers to visit battlefields of the First World War in new Government scheme

    Pupils to visit First World War battlefields

    A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
    The 10 best smartphone accessories

    Make the most of your mobile: 10 best smartphone accessories

    Try these add-ons for everything from secret charging to making sure you never lose your keys again
    Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

    Liverpool v Real Madrid

    Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
    West Indies tour of India: Hurricane set to sweep Windies into the shadows

    Hurricane set to sweep Windies into the shadows

    Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
    Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

    A new American serial killer?

    Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
    Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

    Sting to trap paedophiles may not carry weight in UK courts

    Computer image of ‘Sweetie’ represented entrapment, experts say
    Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

    Return to Fukushima – a land they will never call home again

    Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
    Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

    Wildlife Photographer of the Year

    Intimate image of resting lions claims top prize
    Online petitions: Sign here to change the world

    Want to change the world? Just sign here

    The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?