Lloyds, Halifax and Bank of Scotland to offer £300 interest-free overdraft buffer as Barclays waives interest for a month
Lloyds, Halifax and Bank of Scotland will give customers a £300 interest-free overdraft buffer for three months from Monday 6 April in a bid to help those affected by the coronavirus pandemic, while Barclays is to waive all interest on overdrafts from Friday 27 March to 30 April 2020.
The banks have made this move following HSBC's announcement earlier this week that it would bring in a £300 interest-free overdraft buffer on two of its most popular accounts from this Thursday (26 March).
What are the banks doing?
Here are the details of the changes:
- Lloyds, Halifax and Bank of Scotland are giving customers a £300 interest-free overdraft buffer. Lloyds Banking Group, which owns all three banks, says it will let all current account customers with an arranged overdraft go into the first £300 of their overdraft interest-free from Monday 6 April to 6 July 2020. You won't need to call to set this up – if you have an arranged overdraft, it'll be automatically applied.
Currently, Lloyds, Halifax and Bank of Scotland accounts charge arranged overdraft fees of 1p/day per £6 up to £1,250, 1p/day per £7 between £1,250 and £2,500 and 1p/day per £8 over £2,500. However, the group is also moving on Monday 6 April – the same day the £300 0% buffer comes in – to charging 27.5%, 39.9% or 49.9% EAR variable interest (depending on which account you have and/or your credit score). These are the rates you'll pay from Monday 6 April on any borrowing above the £300 interest-free buffer.
- Barclays is waiving all overdraft interest for a month. Barclays has said it will waive all overdraft interest that would normally be charged on agreed overdrafts between Friday 27 March and the end of April 2020. This will automatically apply to all customers with agreed overdraft borrowing, so again, you don't need to call Barclays to set it up.
Barclays currently charges 35% EAR variable on overdrafts, having changed on Sunday 22 March from charging per day fees ranging between 75p and £3 (for full details, see our Barclays announces overdraft shake-up MSE News story). If you accidentally slip in to your unarranged overdraft, Barclays will also waive any interest charged on that too.
- HSBC is also giving customers a £300 interest-free overdraft buffer. This was announced last week – the buffer will apply to HSBC bank account and Advance account holders from Thursday 26 March for three months. See full details in our HSBC interest-free overdraft MSE News story.
Why are overdraft rates changing now?
Overdrafts are the new danger debt – with many banks changing interest rates to 40%, double those of high-street credit cards.
This follows a change by regulator the Financial Conduct Authority, which means that from Monday 6 April, all banks must replace daily/monthly fees with simple interest rates to improve transparency.
Those who just occasionally dip into overdrafts, or only have small ones, will often find this new system cheaper if they used to have daily fees. Yet those with large, authorised overdrafts of about £600+ could in some cases see costs double. For more info and full help, see our Cut Overdraft Costs guide.
What are the banks saying?
Lloyds Banking Group retail director Vim Maru said: "The introduction of the £300 interest-free overdraft will give our customers some important breathing space at this difficult time. We will be implementing changes to our overdraft interest rates in April, meaning all customers will pay less for their overdraft than they do today."
Gillean Dooney, managing director at Barclays, said: "It's crucial we offer the right support to our customers through this challenging time. We have therefore decided to waive all overdraft interest until the end of April, meaning there will be no charges for customers to use their arranged overdraft. We are reviewing all options to help customers after this time to ensure we support those in financial difficulty."