What does this chart show?
The most generous interest-free “buffer zones” on bank overdrafts that will be available following April’s regulatory shake-up to lending rules.
From April, virtually all UK banks will start charging customers annual interest of about 40 per cent on authorised overdraft borrowing. This means the size of the interest-free buffer zone could have a big impact on what you are charged.
The interest-free amounts on offer vary widely across different banks. All of the deals mentioned are the standard amounts banks offer, but these can change depending on your individual circumstances.
Regardless, many accounts which currently offer interest-free overdrafts to qualifying customers will reduce the size of these from April, or stop offering them altogether.
From April, where can I get the best deal?
FT Money research found that wealthier customers will get the biggest interest-free overdrafts through premier accounts — although from April, the amounts on offer will not be as generous.
Many high street banks offer a premier brand designed for customers who earn over a certain amount — normally upwards of £75,000 a year — or who have linked products such as a mortgage or savings account.
The HSBC Premier and Santander Select accounts will continue to offer interest-free overdrafts of £500 after April.
Barclays Premier will halve its interest-free amount from £1,000 to £500 from March 22. Lloyds and Bank of Scotland Premium, which are not currently accepting new customers, will halve their amount from £500 to £250.
However, those who have NatWest’s Premier account will see their interest- free overdraft disappear completely.
What about standard current accounts?
First Direct offers an interest-free overdraft of £250 to eligible customers. Those who switch to the online bank could also bag a cash bonus of up to £100.
M&S Bank also said it would offer £250 interest free to its customers from 14 March.
Lloyds Banking Group, made up of Lloyds, Halifax and Bank of Scotland, is adjusting interest-free overdrafts on all of its standard current accounts to a uniform level of £50.
HSBC account holders will be offered a limit of £25, and Barclays offers £15 across its standard current accounts.
Barclays customers who currently benefit from the £200 interest-free overdraft included in packaged accounts will see that reduced to £100.
Customers who switch to Nationwide’s FlexDirect account could potentially get an interest-free overdraft of £1,000 or more for 12 months — but the size of this perk depends on your credit score.
Who will lose out?
Banks that will not offer any interest-free buffer zone on their standard accounts from April include Monzo, Virgin Money, Clydesdale Bank, Yorkshire Bank, the Co-operative Bank, Nationwide, NatWest, RBS and TSB.
NatWest had previously offered £10 on most accounts. Its Reward Platinum and Reward Black accounts will no longer offer interest-free overdrafts of up to £250 and £500 respectively.
What about student and graduate accounts?
Interest-free overdrafts on student accounts appear to have survived the cull. NatWest, Santander, Nationwide and Barclays — some of the most popular providers — have all confirmed that no changes are being made to their student accounts in respect of the new regulations.
Those with other providers should check with their bank to ask about any changes.
When will these changes apply?
Some banks, including Nationwide, have already made the changes. Barclays will change at the end of March, and most banks will adopt the new rules in early April.
Many are still in the process of writing to customers with precise details of interest rates on overdraft borrowing, but If you haven’t yet received an email or letter, get in touch or check their websites for more information.