Santander increase will mean rise in cost of banking

Millions will be charged twice as much for going into the red.

Spanish-owned bank Santander is doubling the daily charge for customers who go into the red.

From 16 March, anyone who slips into an unauthorised overdraft will be hit by a daily charge of £1, rather than the existing 50p.

The move will encourage rivals to take another look at their own fees and could lead to an increase in current account fees across the market.

"The concern is that the doubling of overdraft fees from Santander will trigger a new round of similar increases from its high street rivals," said Andrew Hagger of Moneynet.

He pointed out that Halifax already charges £1 per day or £2 per day for authorised overdrafts over £2,500.

Santander said it's simply matching the price of its rivals, but the fee is expensive. It also strengthens the argument that overdraft charges are too complicated.

For instance, First Direct doesn't have a fixed fee but charges interest of 15.9 per cent. That may sound a lot more expensive than Santander's new rate but it could work out a lot cheaper. Anyone with a £500 overdraft for instance, will only end up being charged 22p a day at First Direct, less than a quarter of the new charge at Santander.

Mr Hagger said the Spanish bank's new deal actually works out at an interest rate of 73 per cent for anyone going £500 into the red and being charged £1 a day.

"Although the tariff for each individual bank or building society may be clear, because of the varying combinations of monthly fees, daily fees and interest rates used across the industry, it is impossible to work out which is the best account," he said.

Indeed, that was proved this week by research from consumer group Which?. It asked volunteers – including a maths PhD student – to calculate the charges of an unauthorised overdraft for four different banks.

The volunteers were only able to get seven out of 48 charges correct, prompting Which? chief executive, Peter Vicary-Smith, to say: "Bank charges are too complex and impossible to compare."

Santander says its new deal is "designed to support its customers in managing their money". It has introduced a £12 buffer so people won't get massive charges if they slip £12 or less into the red. There is also a 4pm deadline allowing people to avoid charges if they put accounts right on the day they get overdrawn.

But rival banks already offer better deals. The 1st Account from First Direct offers a £250 overdraft interest free, while Coventry building society offers a similar deal.

However, choose the wrong bank account and overdraft charges can be staggering. The highest current account unauthorised overdraft fee – at £150 a month – is charged by First Direct and HSBC. The same overdraft and account usage at Barclays would attract charges of £66.

Many banks also use expensive daily fees which produce outrageously high APRs. RBS, for example, charges £6 a day, equivalent to an APR of 2,190 per cent, said Which?.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Sport
sportWWE latest including Sting vs Triple H, Brock Lesnar vs Roman Reigns and The Undertaker vs Bray Wyatt
Arts and Entertainment
Louis Theroux: By Reason of Insanity takes him behind the bars again
tvBy Reason of Insanity, TV review
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Arts and Entertainment
tvPoldark, TV review
Finacial products from our partners
Property search
  • Get to the point
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

    Recruitment Genius: Retirement Coordinator - Financial Services

    Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

    Recruitment Genius: Annuities / Pensions Administrator

    Negotiable: Recruitment Genius: You will be the first point of contact for all...

    Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

    £18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

    Ashdown Group: Learning and Development Programme Manager

    £35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    Election 2015: How many of the Government's coalition agreement promises have been kept?

    Promises, promises

    But how many coalition agreement pledges have been kept?
    The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

    The death of a Gaza fisherman

    He built his own reef, and was fatally shot there by an Israeli gunboat
    Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

    Saudi airstrikes are fuelling the Gulf's fire

    Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
    Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

    The only direction Zayn could go

    We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
    Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

    Spells like teen spirit

    A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
    Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

    If fashion is a cycle, this young man knows just how to ride it

    British designer Jonathan Anderson is putting his stamp on venerable house Loewe
    Number plates scheme could provide a licence to offend in the land of the free

    Licence to offend in the land of the free

    Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
    From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

    From farm to fork in Cornwall

    One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
    Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

    Robert Parker interview

    The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
    Don't believe the stereotype - or should you?

    Don't believe the stereotype - or should you?

    We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
    How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

    How to make your own Easter egg

    Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
    Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

    Bill Granger's twist on Easter Sunday lunch

    Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
    Joe Marler: 'It's the way I think the game should be played'

    Joe Marler: 'It's the way I think the game should be played'

    The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
    Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

    Cricket World Cup 2015

    Has the success of the tournament spelt the end for Test matches?
    The Last Word: Justin Gatlin knows the price of everything, the value of nothing

    Michael Calvin's Last Word

    Justin Gatlin knows the price of everything, the value of nothing