Your bank could be about to tell you that you've less cash available – here's what you need to know
A major overhaul is coming to the way banks display what available funds you've got, with three having changed how they show customers' available balances this week, and at least seven more to do so by mid-December.
This comes as the financial regulator is about to bring in new rules on how overdrafts are displayed to customers.
While there's no reason to panic, some HSBC and First Direct customers have been left confused by the changes and worried they've lost cash – so here's a rundown of what's changing and what to look out for.
At the moment, many banks include customers' arranged overdraft amount when they show them their available balance or available funds – so if you have £100 in your account but also an arranged overdraft of £500, your available balance will appear as £600.
But from Wednesday 18 December, new rules from the Financial Conduct Authority will ban banks from doing this. So in the example above, your available balance will appear as £100 instead – and if you went into your overdraft, you'd see a negative number.
The rules are being changed to help people understand and engage more with their overdrafts, making it clearer that overdrafts are a debt. But after HSBC, First Direct and M&S Bank – which are all part of the same group – made the change at the end of last week, it sparked confusion among some customers, with some believing they'd lost large amounts of money due to the way their balance was displayed.
We've full details below on when individual banks are carrying out the overhaul and what you need to look out for. For full help on choosing the best bank account and our current top picks, see our Best Bank Accounts guide.
All banks will be banned from including overdrafts in available balances from Wednesday 18 December – but individual banks are implementing the new rules at different points.
- Barclays, the Co-op Bank, Monzo and Nationwide already exclude overdrafts from customers' available balances – so you won't notice any change going forward.
- HSBC, First Direct and M&S Bank stopped counting overdrafts as part of a customer's available balance on Sunday 24 November.
- The Bank of Scotland, Halifax, Lloyds, Metro Bank, Santander and TSB all told us that overdrafts are still included in available balances at the moment. This will be changed by Wednesday 18 December – but none of the banks gave us a date for exactly when. Starling Bank told us it will make the change on 18 December.
We've asked NatWest and RBS how they display overdrafts in customers' balances and if they're planning to change this, but haven't heard back – we'll update this story as soon as we do.
How are balances displayed under the new rules?
The idea behind the new rules is to make it clearer to customers that an overdraft, even if agreed, is a debt. So in a nutshell, your available balance will only show how much money you actually have in your account, and won't include any overdraft facility you've agreed.
The actual overdraft you have on your account ISN'T changing, so if you have an agreed overdraft you're still able to use it – but when you log into your bank account or use a cashpoint it won't be counted as part of your available balance.
Here's an example to explain the change:
Let's say you've an agreed overdraft of £500 and you're £100 into your overdraft – so you owe the bank £100. Previously, many banks would have shown your 'available balance' as £400. But under the new rules, your balance will be shown as -£100, highlighting the fact you owe the bank – even though you can still spend another £400 if you need to before hitting your overdraft limit.
Some banks also told us the new balance would take into account any pending payments – for example, if you've paid for something on your debit card but the transaction hasn't yet appeared on your bank statement.
Individual banks may display balances slightly differently to others – but to give you an idea of how this could look when banking online, let's suppose you're a Lloyds customer with £1,000 in your account, a pending transaction for £10 and a £500 arranged overdraft facility. Here's how it would look currently:
And here's how the same situation will look after the changes are implemented. 'Funds available' of £1,490 has changed to a 'balance after pending' of £990, with a separate overdraft limit of £500 – though the amount of money you actually have is unchanged:
'A sensible change – but it's important you understand it'
Steve Nowottny, news and features editor at MoneySavingExpert.com, said: "This is a sensible change in the rules that will make it much clearer to customers that an overdraft is a debt, and it's good to see banks starting to give much clearer info to customers.
"Yet it's important you understand this change is happening. If you don't, you may understandably panic and think money is missing from your account, as we've seen in some cases this week. Banks have been working hard to alert customers, but they need to be as clear as possible about what's changing, why it's changing and when it's changing, so that those affected understand what to look out for and benefit from a very positive move."
'I had a sleepless night trying to work out what I'd spent'
While banks have until next month to change the way they show customer balances, HSBC, First Direct and M&S Bank implemented the shake-up last Sunday. HSBC says it's been warning customers about the changes since July in various ways – yet some were still caught off-guard.
One HSBC customer on Twitter said she'd gone into her overdraft and had been confused by the way her balance had been shown, saying: "I had a sleepless night trying to work out what I'd spent that ate my entire overdraft."
And here are some of the other messages we've seen from panicked customers: