Barclays current account customers who use their overdraft regularly will be hit by a huge hike in charges from June under sweeping reforms to its fees. However, those who only dip into the red will be better off.

The overhaul, which comes into effect on 16 June, will leave some paying double for their overdraft. But you can fight the move and cut your costs to zero (read on for how to do so).

The key overdraft changes are listed below (see our Best Bank Accounts guide for the top picks elsewhere).

  • New daily charges, up to £3/day (£1,095/year). Barclays will scrap its 19.3% EAR interest rate on agreed overdrafts and start charging per-day fees. It'll charge 75p/day on up to £1,000, £1.50/day from £1,001 to £2,000 and £3/day on more than £2,000.
  • New charges for breaching your limit. If this happens, Barclays will charge £5/day up to a maximum of £35/month. It's currently 19.3% EAR for exceeding the limit, plus £22 for exceeding the limit for five consecutive working days, up to a maximum £110/month.
  • New overdraft buffers. Customers will be able to go £15 overdrawn and not face any fees. Currently, there's no buffer, though some Barclays accounts have interest-free overdrafts.
  • Paid transaction fees. Currently £8/transaction, these will be scrapped. The charge comes when a payment goes through which puts you over your limit. The £8 charge for a declined item will remain, though – as now – only one will be charged per day.

Barclays changes – the losers

  • Customers who are usually or constantly in their overdraft could face a massive increase in fees. Someone permanently £2,001 into their overdraft will pay £1,095 a year, compared with £386 under the current charges.
  • At £1,001, costs will rise from £193 a year to £548.
  • At £500, costs will rise from £97 a year to £274.

Barclays changes – the winners

  • If you just dip into your overdraft by up to £15, you'll be better off as there'll be no charge.
  • If you exceed your overdraft limit for more than six consecutive working days, you'll pay up to £35/month, compared to the current maximum of £110/month.

How can I cut overdraft costs?

The new terms mean most Barclays customers will pay more for their overdrafts, as daily overdraft charges are more expensive for people who stay within their agreed overdraft limit rather than paying interest. So you have two options to cut costs.

Option 1: Accepted new Nationwide's FlexDirect* customers get a year's fee-free overdraft, so use that to give you time to clear it. If not, it's 50p/day for agreed overdrafts, which is still cheaper than Barclays.

There are also a few accounts offering small interest-free overdrafts. First Direct, for example, gives customers a £250 interest-free limit, although it charges 15.9% EAR above that.

See our Best Bank Accounts guide for the top pick bank accounts if you're overdrawn.

Option 2: Shift your overdraft to a 0% money transfer card. MBNA* for example, has launched 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. In contrast, you'd pay 14.9% for a £2k loan.

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 red. 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.
  • Set all your direct debits to be taken on the same date each month. This way, if someone tries to take a payment from your account but can't, at least then all these transactions will only incur one £8/day fee.
  • 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.

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