Millions of Santander current account customers will face new overdraft charges from 19 August, which will leave some paying more than they do now.

If you've got a 123, Everyday, Premier, Premier Direct with Travel, or International Student current account, then the changes affect you. The rates on other Santander accounts, which are no longer on sale, stay the same.

Here's a roundup of who will lose out and who will win as a result of the changes:

Losers:

  • Customers who are in their arranged overdraft for more than 20 days a month will pay more.
  • Customers who are in an unarranged overdraft will pay more.
  • Customers with Everyday, Premier and Premier Direct with Travel accounts who are in their unarranged overdraft for more than 20 days a month will pay more.

No change/ winners:

  • Customers who are in their arranged overdraft for under 20 days a month will see no change to what they already pay.
  • Customers who incur fees for transactions made within an unarranged overdraft and fees for bounced payments will either see the cost of these fall or, if they have a 123 account, they will no longer be charged for these.

Here are Santander's new overdraft charges:

Santander overdraft fee changes
  123 current account Everyday, Premier and Premier Direct with Travel accounts
  Now From 19 August Now From 19 August
Arranged overdraft fees (i) £1/day, capped £20/mth £1/day, no cap £1/day, capped £20/mth £1/day, no cap
Unarranged overdraft fees (ii) £5/day, no cap £6/day, no cap £5/day, capped at £100/mth £6/day, no cap
Paid transaction fees (iii) £5/payment No fee £25/payment £10/payment
Bounced payment fee (iv) £10/payment No fee £25/payment £10/payment
Overall monthly fees cap £95/mth £95/mth £150/mth £150/mth
(i) If you're in an arranged overdraft of £12 or less, you won't incur any usage fees. (ii) If you're in an unarranged overdraft of £12 or less, you won't incur any usage fees or paid transaction fees. (iii) A paid transaction fee is charged when money comes out of your account either when you're already in an unarranged overdraft, or which pushes you into one. (iv)When the bank refuses to take money that would result in an unarranged overdraft or that would take you further into an existing unarranged overdraft, you're charged an unpaid transaction fee.

Those with an International Student account will also see the fee for an unpaid transaction fall from £25 to £10 per transaction. Their overall monthly fees cap will remain at £150. Arranged and unarranged overdrafts are not available with this account.

Martin Lewis
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'Check how you're affected'

MoneySavingExpert.com money analyst Helen Saxon says: "If you're with Santander it is vital you check how you're affected by these changes. Whether you're a loser or not there are cheaper accounts out there if you're overdrawn, and this is a good opportunity to check you've got the bank account that's best for you.

"If you haven't, switch – it's a simple and quick process and our Best Bank Accounts guide has the full top picks."

Santander's changes come after the Financial Conduct Authority announced last month that borrowers were paying too much for overdrafts, and it would investigate the issue. (See the Overdrafts cost too much MSE News story.)

Similar changes at Barclays mean its customers who use their overdraft regularly will also be hit by a huge hike in charges from 16 June. However, those who only dip into the red occasionally will be better off (see the Barclays current account fee revamp MSE News story).

How can I cut overdraft costs?

The new terms mean some Santander customers will pay more for their overdrafts, so you have two options to cut costs.

Option 1: Accepted new Nationwide FlexDirect* customers get a year's fee-free overdraft, so use that to give you time to clear it. After the first year, it's 50p/day for agreed overdrafts.

It also charges £5/day, capped at £60/month for unarranged overdrafts, and there's a £5 charge for each paid/unpaid item, capped at £35/month. Nationwide won't charge more than £95/month in unarranged overdraft charges.

For smaller interest-free overdrafts, First Direct* gives customers a £250 interest-free limit, although it charges 15.9% EAR above that. See our Best Bank Accounts guide for more info.

Option 2: Shift your overdraft to a 0% money transfer card. MBNA* for example, has a transfer deal at 0% for 30 months. If you transfer a credit card balance, there's a 2.89% fee on the shifted debt, but you can pay into a bank account for a 4% fee. However, after 30 months, it's a big 22.9% rep APR.

Both options require a decent credit score.

What if I can't switch bank?

You can still switch bank if you're overdrawn, but there aren't set rules in place – it will vary between providers. What you'll need to do with your overdraft will depend on whether your new provider offers you an overdraft facility.

Whether you get an overdraft, and whether your limit is high enough to switch your overdraft, will depend on the new account provider's normal lending procedure. If you can't switch, here are some tips on how to cut costs:

  • Do a budget and try to get yourself into the black. Also make sure you keep track of everything you owe. For help on how to do this, including a free budget planner to assess your finances, see our Budget Planner guide.
  • Aim to pay a set amount off your overdraft each month. For example, set a goal to reduce it by £100/month and arrange your monthly budget accordingly.
  • Talk to your bank about extending your arranged overdraft. If it won't do this, see if you can get a larger overdraft with a different provider. If this still doesn't work, think about converting your overdraft into a loan so you owe the loan provider, rather than the overdraft provider – although do your sums first.
  • Manage your credit score. A better credit score means you're more likely to be able to get credit elsewhere, for example a 0% balance transfer credit card, or a cheap personal loan.

What does Santander say?

Reza Attar-Zadeh, head of UK retail banking at Santander, says: "We regularly review our products compared to the market, and are introducing the new tariffs in the light of recent changes in the competitive landscape.

"We are writing to customers, providing at least 60 days' notice, so that they are able to understand how they may be affected by the changes."

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