Last year, the Financial Conduct Authority (FCA) announced changes to charges banks are allowed to apply to overdrafts, which come into play from Monday 6 April 2020. As students, we often make use of our overdraft facilities so it is really important that we stay aware of the changes and understand how we may be affected by them.
The FCA has changed the way that banks are allowed to charge interest for overdrafts. At the moment, banks are able to apply both a fee for using an overdraft and an interest charge against the amount the account is overdrawn. The changes will mean that they will only be allowed to charge interest; for some of you this will mean lower charges, but others of you may be hit by higher costs. It’s really important that you check with your bank to see how the change might impact you.
Monday 6 April 2020, although some banks, including HSBC and Barclays, have already implemented the changes.
If you have a regular student bank account and are a home student then you are likely to be unaffected unless you go over your arranged overdraft. Check the specific terms and conditions of your account and overdraft with your banking provider. If you go over your arranged overdraft then you may be hit by interest charges.
Many banks provide a handy calculator that you can use to figure out how much you would be charged for being in your overdraft, like this one provided by Santander. Interest rates and fees vary between banks, it is important to check with your own account provider.
The changes will impact all banks who operate in the UK, regardless of their country of origin. If you have an arranged overdraft facility that you use or a bank that supports the use of an unarranged overdraft, then it is worth checking just to be sure.
In light of the Covid-19 pandemic, some banks have made some changes (such as waiving interest) to help people out during this challenging time. The changes vary hugely from bank to bank so it is important for you to read all the terms and conditions and make yourself aware of any areas that might impact you. Please keep abreast of any changes that your banks are making by visiting their sites directly and reading any emails that they send you. However, note that banks will never ask you to divulge your bank details by calling you or via email.
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