Major high street bank to hike overdraft charges

Millions of Lloyds, Halifax, and Bank of Scotland customers are set to be charged more to use their overdraft from August.

The three major high street banks are all part of Lloyds Banking Group, which has announced an overhaul of its overdraft charges. The changes could see some customers charged up to 10% more for using their overdraft.

Lloyds’ standard interest rate for overdrafts - which is what most customers are on - is 39.9%. The increase will mean that millions are set to pay 49.9% interest every time they dip into their overdraft.

How much are overdraft fees increasing?

From August four new interest rate tiers will be introduced, which are:

- 19.9%

- 29.9%

- 39.9% (the rate most customers are currently on)

- 49.9%

Some customers will see the increases in two stages - a 5% rise in August, followed by another 5% increase in January 2025. Club Lloyds customers, who pay a monthly premium for their account, will see their overdraft charges increase by 7.5% in August with a further rise of 5% planned for January 2025. This means from next year they will pay 39.9% interest on their overdrafts.

The bank will determine the specific criteria for each tier, based on a customer's credit information and monthly account activity. This means it may be difficult for customers to predict which rate they'll be assigned until Lloyds gets in touch.

Accounts Affected by the Changes:

The accounts set to be affected by the upcoming changes include:

Bank of Scotland

• Platinum Account
• Silver Account
• Classic Account

Lloyds

• Classic Account
• Club Lloyds Account
• Silver Account
• Club Lloyds Silver Account
• Club Lloyds Platinum Account

Halifax

• Ultimate Reward Current Account
• Reward Current Account
• Current Account

What are my options if I don’t want to pay Lloyds new overdraft fees?

The easiest solution would be not to use your overdraft, but this isn’t feasible for lots of people.

A solution could be to move to a new bank that charges lower overdraft fees. Some might even give you a cash bonus for switching. Or you could consider a specialist provider such as Think Money, which for £10.95 a month, has a built-in budgeting tool that prevents you from missing bills and needing an overdraft facility.

If you find yourself caught short occasionally, it might be cheaper to use a credit card for short-term spending. Many have lower interest rates than an overdraft. But you must be confident you can pay this off every month otherwise it could lead to a debt problem.