Lloyds TSB is planning a bank charges shake-up this winter which could see those overdrawn pay £60 a year more.

However, customers who slip into an unauthorised overdraft could be hundreds of pounds a year better off following pressure from the bank charges reclaiming movement (see the Best Bank Accounts guide).

Here is how the changes, which come into force on 2 December, will affect you:

How you'll pay more when overdrawn (within your limit)

Lloyds TSB will introduce a single new £5 per month 'overdraft usage fee', in addition to interest currently charged, for those overdrawn within their limit.

If overdrawn throughout the year, that's a £60 additional charge.

On the classic account that currently charges 19.3% annual interest, someone constantly overdrawn by £1,000 will pay £253 in annual fees compared to £193 now.

However, you won't be charged if less than £10 overdrawn as the bank will introduce a buffer.

And anyone with an interest-free or fee-free account won't pay a fee as long as they stay within their agreed no-charge limit.

Lloyds-owned Halifax faced a backlash last year after hiking charges for those who go overdrawn to £1 a day (which could equate to £365 a year), regardless of their balance, which hits those who slip over the hardest (see the Halifax anger MSE News story).

The new Lloyds charges will mostly be lower than Halifax's for those who are regularly overdrawn but are more expensive for those who slip over for fewer than five days (if more than £10 overdrawn).

How you'll pay less when over your limit

While authorised overdraft charges are rising, if you slip into what the bank calls an "unplanned overdraft" you'll pay less from 2 December.

There are a raft of changes, including:

  • The £15 monthly fee for being in an unauthorised overdraft will fall to £5 (though this will only be charged once regardless of whether your overdraft is authorised or unauthorised).
  • The £20 fee for a rejected transaction will fall to £10.
  • Daily fees for sitting in an unauthorised overdraft will drop from up to £20 to up to £10. The level of the charge depends how far into the red you are, though anyone more than £100 over their limit will pay the full charge (£20 now or £10 from December).
  • Under the new rules, you can only get eight daily fees per month, compared to the current 10.
  • You won't get any "unplanned" fees if just £10 over your limit due to a new buffer.

Anyone £200 over their limit for ten days a month with three declined transactions in that period will pay £115 in fees during that month under the new regime compared to £275 now.

This is still a hefty amount so ensure you do a full Budget and a Money Makeover if close to the edge.

Banks and building societies have hammered those who breach their overdraft limit over recent years with sky-high charges of up to £39 a pop, though the coalition Government has pledged to introduce measures to curb "unfair" charges (see the Bank Charges Reclaiming and the Bank Charges Pledge MSE News story).

Mobile banking alerts

Lloyds says customers can sign up to its mobile banking service, which will become free from 2 December (£2.50 per month now), to help avoid going into the red as they'll receive alerts when close to the edge.

The overdraft changes apply to all Lloyds TSB current accounts, other than those that don't allow you to slip into the red.

The bank is also scrapping the 0.1% credit interest on most of its accounts from December, to pay no interest.

However, those on its Vantage account that pays up to 4% interest won't see a cut, as things stand.

Top accounts

If you regularly go overdrawn, the Alliance & Leicester (A&L) Premier account offers a £100 sign-up bonus, a year's interest-free overdraft and inclusive European travel insurance if you pay in £500 a month.

See the Best Bank Accounts guide for more options, including the top deals for those in credit.

Further reading/Key links

Top deals: Best Bank Accounts
Money help: Budget, Money Makeover, Debt Help