Lloyds overdraft shake-up: quick look
LLOYDS shook up the way they charge their customers for using an overdraft this week.
No one can agree on whether the changes will be good or bad for current account holders, though.
Announcing the news, Lloyds TSB director Mike Regnier was unsurprisingly upbeat.
"Our customers are telling us that they still think our unarranged overdraft fees are too high and we are responding to that very directly by cutting them - and it is as simple as that."
Erm, except that it's not that simple. At all.
There are definite winners and losers in the new system, as well as quite a few who can safely ignore the new regime altogether.
If you already have a Lloyds account read on to see how the new rules will really impact on your finances. Or skip to the end to see how the changes leave Lloyds compared with competitors.
Lloyds overdrafts: the boo/hooray guide
Consumers could be hit by the new Lloyds overdraft rules in a number of ways. The following is a quick guide only so check a few sections if your current account borrowing behaviour is subject to change and always double check your terms before relying on the below.
Always in credit
Never use your overdraft? Don't think you're exempt from this hoo-ha.
Currently, Lloyds pays a small amount of interest - 0.1% to 1.5% - to those in credit on their accounts.
Under the new rules this will either be scrapped altogether (Classic account) or reduced (Classic Plus account).
However, Vantage customers will continue to receive their 2% to 4% interest rate.
Always in authorised overdraft: Classic accounts
Lloyds are doing away with the distinction between authorised and unauthorised overdrafts.
That means £5 a month for using an overdraft, agreed or not, on top of the usual EAR.
That's a pretty terrible deal: Lloyds interest rates for overdrafts start at 10.4% EAR (Premier, Premier Plus and Platinum Plus accounts) and run all the way up to 19.3% EAR (Classic Account and Current Account).
An extra £5 is effectively increasing those, already high, equivalent annual rates significantly.
Always in authorised overdraft: Student and Added Value accounts
If you've got an agreed fee free overdraft in a specialist account (i.e. student/graduate, gold, platinum or premier) then don't panic, your authorised overdraft is safe.
Just avoid going into your unauthorised overdraft, see below.
Sometimes in unauthorised overdraft
Lloyds are introducing a £10 overdraft 'buffer' so if you occasionally go over a little bit you won't be charged.
The fee for bouncing a cheque or electronic payment will also be halved to £10 and you'll still only be able to rack up a maximum of three bounce fees a day.
The £15 unplanned overdraft fee is now £5 and daily fees have been reduced from £6.20 to £5.10. You'll only be subject to maximum of 8 daily fees per billing period (previously 10).
Always in unauthorised overdraft
At the moment you pay £15 a month if your account accidentally goes overdrawn when you don't have an authorised overdraft (more on the difference between authorised and unauthorised here).
From December that fee will be just £5 a month.
Lloyds have also changed their sliding scale of daily fees.
Any overdraft over £25 will be charged £10 a day, overdrafts between £10 and £24.99 will be charged £5 and overdrafts under £10 will be fee free. There's a maximum of 8 daily fees per bill so £80.
Note that, as with authorised overdrafts, however, this is on top of the EAR rate so it's still by no means cheap.
In fact, only payday loans are more expensive.
Where this leaves Lloyds
The bank say that they had their change of heart, if that's what it was, on overdrafts after listening to their customers.
"By far the biggest proportion of complaints in my mail bag is about unauthorised overdraft fees," the Lloyds personal current account director Mike Regnier told The Guardian.
Make no mistake, though, the new Lloyds rules don't extend their leniency far past unauthorised overdrafts.
In fact, it seems likely that Lloyds will swap one postbag of complaints for another: authorised for unauthorised overdraft users.
It'll certainly give many of Lloyds' best customers food for thought when they look at other current account options.
Going into an agreed overdraft by £500 for 30 days will now cost £13.04 rather than £8.04 which makes Lloyds one of the most expensive places to have a borrowing agreement for a current account on the high street.