Current account holders unaware of overdraft changes

Sixty-six per cent of current account holders are unaware of the new FCA changes to overdraft rates, new research from comparethemarket.com has revealed.

With 52 million active current accounts across the UK, comparethemarket.com suggested this equates to 17 million people nationwide unaware of potential changes to their personal finances.

From 6 April 2020, new FCA rules mean that banks must charge a simple annual interest for overdrafts, without additional fees and charges. Fixed daily or monthly charges, and fees for having an overdraft facility will be banned in a move to make overdrafts more simple, fair, and easier to manage and compare.

The research, taken from a survey amongst 2,102 adults in the UK that was conducted in January, found that 40% of respondents had gone overdrawn in the last 12 months.

comparethemarket.com also revealed that despite the incoming FCA changes, consumer awareness remained low – with 42% of individuals unaware of how much their providers were charging in overdraft fees, despite being an average of £377 overdrawn. Furthermore, 28% felt that their bank did not clearly explain their overdraft charges to them.

“We are supportive of the FCA’s view that problems in the overdraft market need to be addressed and it is encouraging that steps to protect customers have been taken,” comparethemarket.com head of money, John Crossley, commented. “However, consumers may be wondering why a lot of high street banks have adopted the 39.9% interest rate – a figure which is almost double the APR of a typical credit card.

“That many major high street banks have adopted an APR which is even higher than the rate some challenger banks offer to their highest risk customers could suggest that some providers still view overdrafts as a lucrative source of revenue.

“If you are unhappy with the overdraft fees your bank is charging, it is worth finding a more competitive provider or considering a cheaper alternative if you need to take out credit.”

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