Bank account overdraft rules are changing next week – how will it affect you?

The Financial Conduct Authority (FCA) are on the verge of introducing drastic changes to the banking industry. As it stands, banks are free to alter their overdraft charge rules but this will no longer be the case moving forward.


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New rules put forward by the FCA are said to make the costs of overdrafts clearer and easier to compare.

While some have detailed that this will negatively impact customers, the FCA have detailed that seven out of ten customers will wither be better off or see no changes in their circumstances.

According to their research, some 14 million people in the UK use an unarranged overdraft each year.

Worryingly, the FCA’s work highlighted that the overdraft prices were regularly 10 times higher, and at times up to 20 times higher than payday loans.

Customers of some of the largest banks in Britain have been charged effective arranged overdraft rates in excess of 80 percent per year once fees and charges are factored in.

According to their analysis, the cost of borrowing £100 through an unarranged overdraft is expected to drop from around £5 per day to under 10p a day.

Taking this into account, an unarranged overdraft user borrowing £100 for seven days could be better off by as much as £55.35 a month under the new rules.

There are a few different facets to the changes but Colin Rowe from the Money Advice Service details that there are three main changes that will affect people the most:

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  • Interest on all overdrafts will be charged at a single annual interest rate (APR)
  • No daily or monthly fees for using an overdraft.
  • The same interest rate for arranged and unarranged overdrafts.

While the official rules have not kicked in yet several banks have already made changes to their fee structure in preparation.


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Not all banks and building societies have revealed what their changes will be.

For the ones that have, they have detailed charges ranging between 15 and 40 percent.

These changes will be enforced from next week, with it expected to be completed at the latest by 6 April.

Banks will likely introduce more general changes in the coming weeks.

The Bank of England has recently lowered the base rate to 0.1 percent.

This is the lowest rate it has been in the banks history and it will have a knock on effect for regular banks across the country.

High street banks are expected to follow what the Bank of England sets forth, meaning that current and savings accounts across the country are likely to have their rates lowered.

This will have an impact on savings and mortgages for individuals, but the wider economy is expected to get a boost from the central banks actions.

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