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Warning: Lloyds, Halifax or Bank of Scotland customer? It could be about to increase your overdraft to 50% – full help and who's affected

If you're a Bank of Scotland, Halifax or Lloyds customer, the interest rate you're charged for using your overdraft could soon go up to 49.9% as part of a fees shake-up. The Lloyds Banking Group, which owns all three brands, says most customers will be charged the same or less after the changes – but others will pay more, and some Club Lloyds customers will see their rate nearly double, from 27.5% to 49.9%.

Below we explain what's happening and what you can do about it. For more help, see our guide to Cutting overdraft costs.

Bank of Scotland, Halifax and Lloyds' new overdraft rates explained

Here's how the banks' overdraft rates are changing:

At a glance: Bank of Scotland, Halifax and Lloyds overdraft changes

Previous rates New rates
- 27.5% (some Club Lloyds customers are/were on this)
- 39.9% (most Bank of Scotland, Halifax and Lloyds customers are/were on this)
- 49.9% (some Bank of Scotland, Halifax and Lloyds customers are/were on this)

ALL Bank of Scotland, Halifax and Lloyds customers will be on (or moved to) one of these:

- 19.9%
- 29.9%
- 34.9%
(temporary rate for six months only; after that it goes up to 39.9%)
- 39.9%
- 44.9%
 (temporary rate for six months only; after that it goes up to 49.9%)
- 49.9%

Which rate you get will be based on an "affordability assessment", including your credit history and how you use any accounts you have with the banks – though the group says 39.9% will remain its standard rate.

The group told us that "the vast majority" of those with an arranged overdraft will see their rate stay the same or fall – but refused to say how many customers would have their rate increased.

  • If your rate is going up, you'll be given 60 days' notice of the change – and your rate will rise from August 2024. In this scenario, depending on what your rate is ultimately rising to, you'll first be put on a 34.9% or 44.9% rate for six months to "limit the impact" of the increase; after that, your rate will rise again to either 39.9% or 49.9%.

  • If your rate is going down, you'll be given seven days' notice, with the lower rate coming into effect after that. The group told us it started writing to affected customers in mid-May.

These changes won't affect you if you don't have an overdraft set up on your account, though if you do decide to add one in future, it'll be at one of the four new rates set out above (19.9%, 29.9%, 39.9% or 49.9%).

Cut overdraft costs – can you get it to 0%?

You have a number of options to try to reduce costs:

  • Check if you can switch to an account with an interest-free overdraft. If you're not desperate to stay with Bank of Scotland, Halifax or Lloyds, you may be better off switching to a bank with a 0% overdraft.

    For example, First Direct offers many a £250 0% overdraft (39.9% above) and £175 free cash to switch, while Nationwide offers newbies to its FlexDirect account a 0% overdraft of up to £1,500 for the first year (39.9% after). Use the banks' overdraft eligibility checkers first, which should help you find out if you're likely to get them before you apply.

  • Alternatively, try a specialist 0% 'money transfer' credit card. This is where, for a one-off fee of about 4% of the amount you're transferring, the card pays cash into your bank account. You can use this to clear your overdraft, so you owe the card instead at 0%. You can currently get up to 12 months at 0%. For a full rundown, see our Money transfer cards guide.

  • If your rate is going up and you're struggling, talk to your bank – and complain if necessary. The Financial Conduct Authority (the banking regulator) has said it expects banks to take "positive steps" to help people in financial difficulty as a result of overdraft charges – this could include waiving or reducing your overdraft interest, or letting you repay it as a loan with a lower rate.

    In the first instance, contact Bank of ScotlandHalifax or Lloyds directly to see how they can help. If that doesn't work, raise a formal complaint – explain that you're being trapped in debt at a higher interest rate without being given alternatives to get out of it, and that this could be a breach of the regulator's Consumer Duty rules (these require banks to treat customers fairly and deliver good outcomes).

    If your bank can't or won't help, you can then escalate your complaint to the free Financial Ombudsman. We've step-by-step help, including a template letter you can use, in our Overdraft cost-cutting guide.

What to do if you're struggling with debt

If you're struggling, you can find full help in our Debt crisis help guide, though first there are three questions you should ask yourself...

  • Do you struggle to meet minimum monthly payments?
  • Is your total debt (not mortgage/student loan) over one year's salary?
  • Do you have sleepless nights or depression/anxiety over debt?

If you answer 'yes' to any of these, the solutions in our guide may not be suitable. Instead you should consider getting free, one-to-one debt-counselling help from CAP (which gives emotional support too), Citizens AdviceNational Debtline, or StepChange.

They're there to help, not judge. The most common thing we hear after is: "I finally got a good night's sleep". Just go for it, read inspiring stories in our Debt-free wannabe forum, and also see our Mental Health & Debt guide.

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