RBS and NatWest fees revamp penalises authorised borrowers

Overdraft charges shakeup effectively charges the 'good' customers to subsidise the 'bad'

Millions of NatWest and Royal Bank of Scotland current account customers are to be hit with new charges of up to £72 a year – on top of the interest they must pay – if they go overdrawn by more than just a tenner.

RBS, which is 82% owned by taxpayers, is introducing an arranged overdraft fee on 12 July. Some customers with such overdrafts might be annoyed to learn that this fee is in effect being introduced to finance a cut in the costs faced by those who go into the red without permission.

A number of changes will take effect on that date, and these will mainly affect Select and Select Silver accounts. If you have a standard NatWest or RBS current account, it will change into a Select account on 12 July.

Your account will stay the same but there will be a new arranged overdraft "usage fee" of £6 per month. This will be levied if you dip into your overdraft by more than £10 and will be charged on top of your interest – the typical overdraft rate is 19.89% EAR. In other words, you would have to pay an extra £72 in charges over a year.

To make matters worse, the bank is slashing the interest-free buffer that many account holders enjoy. Most customers benefit from an interest-free threshold – for standard current account customers it is £100. But from 12 July this will be cut to just £10, so if you go more than £10 overdrawn with permission, you'll pay a £6 fee per month plus interest.

The banks are removing the fees that some customers pay for setting up and renewing arranged overdrafts.

The winners in this shakeup will be customers who go into the red without sorting out an overdraft facility first, or who exceed their agreed limit. If you slip into unarranged overdraft territory to the tune of more than £6, you will pay £6 per day. However, from July, the number of daily fees you can be hit with per month will be capped at 15. So if you have an unauthorised overdraft for 15 days or more per month, the maximum you will need to pay will be £90. That is less than half the maximum £186 per month that is charged at present. You don't pay interest on an unarranged overdraft.

Responding to the changes, consumer organisation Which? said: "These new charges are a significant increase for those who only dip into their authorised overdraft each month, and will make it harder for people to compare the cost of running their account with other banks." It added: "To help consumers, switching banks must be made much easier and the regulator must clamp down on complicated and excessive bank charges."

An RBS spokeswoman said it is halving the amount it charges for unarranged overdrafts to help those who get into financial difficulty, and that the bank was increasing the fees on accounts with arranged overdrafts to fund this. The new usage fee does not apply to Select Platinum, student, graduate or accounts in the black.

If you are someone who regularly uses your overdraft, make sure you are getting a good deal. Some banks offer special deals to encourage you to switch over to them.


Rupert Jones

The GuardianTramp

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