Overdraft charges to change, but will the new fees put people further in debt?

Crosshills, West Yorkshire -- (SBWire) -- 11/01/2010 -- Unauthorised overdraft charges of up to 20 per cent will be stopped for NatWest and RBS customers in February 2011.

In a move the banks describe as simplifying the charges, customers will pay a fee of £6 per day for any unauthorised overdraft of more than £6.

Currently RBS and NatWest charge for 'the paid referral fee', 'the guaranteed card payment fee' and 'the maintenance charge' which will be merged into the one £6 charge. Other fees for a bounced cheque, direct debit or standing order will increase from £5 to £6 every time, up to a £60 maximum fee.

The charges will not apply to customers with a basic bank account, a student bank account or graduate account. None of these changes will affect people who have arranged an overdraft in advance.

Head of overdrafts at RBS said: "We asked our customers about products and charges and they told us they wanted them to be simply and easy to understand."

Craig Gedey Marketing Manager at Debt Advisory Line http://www.debtadvisoryline.co.uk said: "Making all bank charges easier to understand is a good for customers; however a fee of £6 per day will mean substantial costs for people who stay overdrawn without authorisation."

"People who are continuously overdrawn face costs every month, pushing them further into debt; a vicious circle that needs to be stopped. At Debt Advisory Line we offer debt management plans to help people repay their debts. We also try to negotiate with lenders to have interest and charges stopped so that repayments go towards what is actually owed rather than repaying only the interest."

EBS have also said that a text message and email warning service will be introduced to warn customers in advance that they would be charged if going overdrawn without authorisation.

The coalition government has stated in its 'coalition document' that it will be putting pressure on the banks with respect of protecting consumers against bank charges.