Monzo and Starling raise overdraft fees, following HSBC, Nationwide and First Direct
Days after it hit headlines that Monzo would be scrapping their fixed 50p a day overdraft charge, Starling Bank followed suit and hiked fees.
This news comes after the Financial Conduct Authority (FCA) confirmed in June 2019 that it would attempt to “fix a dysfunctional overdraft market” and ensure that customers – especially those that are vulnerable – are protected.
The FCA called for banks to remove unarranged overdraft fees and charge a single interest rate by 1 April 2020.
Today Monzo customers are charged a fixed daily fee of 50p when they are overdrawn by more than £20, no more than £15.50 a month. From April 2020, this will shift to a credit score based model where customers will be offered 19%, 29% or 39% EAR variable.
Overdraft limits will also be increased from £1,000 to £3,000 and Monzo will remove the £20 fee free buffer. The challenger bank claims that 87% of customers will be better off or see a monthly change of less than £1.
Starling, however, will be offering 15%, 25% or 35%, also dependent on risk-based pricing and will remove the £2 maximum monthly interest rate charge.
After what was referred to as “the biggest overhaul to the overdraft market for a generation,” HSBC announced that from 14 March 2020, the £5 daily usage fee and reduce the Monthly Maximum Charge for using an unarranged overdraft to £20. The new charge will be 39.9% EAR variable.