High street banks NatWest and Royal Bank of Scotland have raised the daily fee charged to customers who go into an unarranged overdraft despite cutting the maximum monthly charge.

The daily unarranged overdraft levy charged by both banks – part of the Royal Bank of Scotland (RBS) Group – has jumped by a third from £6 to £8 while the monthly maximum has dropped by a fifth, from £90 to £72.

Under the new system, 'occasional infringers' – those who go into an unarranged overdraft by more than £10 on fewer than 13 days a month – will be worse off.

RBS Group says fewer than 5% of its current account holders use their unarranged overdraft, and people who do typically borrow between £50 and £60 over an average of four days – meaning their fees will now be £32 instead of £24.

It added that Select account customers can opt into its free 'Overdraft Control' service – this stops you going into your unarranged overdraft and means you won't be charged fees for unpaid transactions.

Martin Lewis
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Last week, regulator the Financial Conduct Authority issued a report warning that customers were struggling with the high costs of unarranged overdrafts – saying it would take action if it saw fit.

Banks must now set a maximum monthly unarranged overdraft charge; however they can set whatever limit they like, and so this is unlikely to tackle the problem.

If you're struggling with overdraft charges, take a look at our Cut Overdraft Costs and Debt Help guides. And if you want to switch to a new account with a 0% overdraft, see our Best Bank Accounts guide.

What will banks' maximum charges be?

Lloyds Banking Group announced last month that from November it's scrapping all unarranged overdraft charges, and overhauling arranged overdraft costs. Until then, its maximum monthly charge for going past your limit will be £95.

While RBS and NatWest have increased their daily charges while cutting the monthly cap, a couple of banks – HSBC and First Direct – have removed interest charges on their unarranged overdrafts. Barclays scrapped unarranged overdraft fees in 2014.

Here's a table showing several current account providers' monthly maximum charges for unarranged overdrafts:

Bank and building society max monthly charges for unarranged overdrafts
Bank Max monthly charge
Barclays £32 (i)
Clydesdale/Yorkshire Bank £60 to £100 (ii)
First Direct £80
HSBC £80
Lloyds Banking Group £95 (iii)
Nationwide £50
NatWest/RBS £72
Santander £95 (iv)
Tesco Bank £75
TSB £80
(i) No unarranged overdraft; £8 unpaid item fee (max 4/mth). (ii) Depends on current account. (iii) No fees from November. (iv) Cap applies to arranged and unarranged overdrafts.

What's an unarranged overdraft?

An unarranged overdraft is when you go beyond your allowed limit so you incur bank charges – you could be charged anything from interest to a daily or monthly fee – often up to £8/day.

You can also be charged fees for paid or unpaid items – these are where a payment has taken you into your unarranged overdraft and the bank has accepted or rejected the transaction. They can be hefty, amounting to £5-£10 per payment.

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