It's been a turbulent couple of years for our banks. They've not only been fighting for their own survival, they've also been fighting their own customers on bank charges.
For four years now consumer champion Martin Lewis has been campaigning about what he believes are legally unfair charges levied by banks when you go beyond your authorised overdraft limits.
Their charges have caused such outrage, that six million of you have downloaded his letter to help you claim them back. The Office of Fair Trading took the case to court to get a ruling. The case has dragged on for more than two years but the result of the case is now due before Christmas.
Whatever happens in the courts we have already seen banks having to bring down their unauthorised bank charges. However, one bank has used this as the perfect excuse to re-jig its entire overdraft structure.
In 2000 the Halifax pioneered its all singing all dancing TV ads making stars of its own staff. But nine years later, is anyone still singing? During last year's economic crisis, the bank faced collapse and had to merge with Lloyds and be rescued by a government handout.
Last month, the bank we now own a huge chunk of, repaid us by writing to its 10 million customers telling them that it was about to make their charges much simpler. With great fanfare it announced it would slash its unauthorised overdraft charges from £35 per transaction to a £5 a day. If you spend beyond your limit you will be better off which is good news.
However, for many other customers, who stick within their overdraft limits, it's a different story. For most customers, the Halfiax has chosen to ditch free overdrafts and replace all its interest charges with a flat fee. If you're within your limit and borrowing up to £2,500 it will cost £1 a day. If your overdraft is more than that it doubles to £2 a day.
Halifax says it's making things simple and conceptually it is, the problem is for some people it's simply going to cost a fortune. Imagine you slip £10 overdrawn without realising it until 20 days later when you get your statement, that'll mean you pay £20 on a £10 overdraft. In fact, for someone £10 overdrawn, £1 a day is equivalent to 36,500% interest per year.
These changes happen on 6 December, and many of the Halifax's customers will pay more.
While Halifax isn't the only bank that's starting to use this way of charging, the real problem is how much it could cost you. The Alliance and Leicester caps its maximum authorised overdraft fees at £5 a month, but with the Halifax it could be up to £60. What the Halifax is doing might be simple but it's a slap in the face for many customers who make sure they stick within their limits.
Find out more about the new Halifax charges on Martin Lewis' site.
The Halifax told Watchdog:"
In December 2008 we announced our intention to launch our new Reward Current Account in February 2009. The Halifax Reward Current Account replaced the traditional existing interest (credit/debit) and fee structure with a new approach based on simplicity and an even better deal for customers.
A market leading benefit
For the new account, credit interest was replaced by a cash payment of £5 per month irrespective of balance when accounts are funded with £1,000 or more a month - that's potentially £60 a year. Traditional arranged and unarranged overdraft fees and interest rates were replaced with a daily fee. Unlike other offerings on the market, the account does not require a cross product holding and there is no annual fee. The Halifax Reward Current Account is open to both new and existing customers. For overdrafts the new structure is as follows:
• Traditional unarranged overdraft fees were removed - no debit interest, no monthly unarranged overdraft charges and no fees for paid or unpaid items are applied. No charge is made if an account is brought into credit by the end of the banking day.
• Currently, for many Halifax customers the unarranged overdraft charge is £28 a month, with paid and unpaid item fees at £35 (subject to a maximum of three a day). The new Reward Current Account and daily overdraft charging structure does not feature these.
• Customers using an arranged overdraft of up to £2,500 will be charged £1 per day for each day they use their overdraft. The OFT study into 'Personal Current Accounts in the UK' published in July 2008 showed that around two-thirds of all active accounts don't use an arranged overdraft.
• For those using an arranged overdraft of over £2,500 a charge of £2 per day will be applied for each day they use their overdraft. The OFT study revealed that 95% of people who utilised an arranged overdraft had an average daily balance of less than £2,000.
• Customers who use an unarranged overdraft will be charged £5 each day they are over limit. We will write to customers immediately to inform them that they have exceeded their arranged limit and again every seven days after they remain over limit.
Informing customers of our changes.
In accordance with the banking code, we will always give customers at least 30 days notice of any changes. For many customers we will have given them significantly more time than this. We started to write to customers about the changes at the beginning of October and every affected customer will have been notified by the end of the month.
Overdraft limits
As a responsible lender; Halifax regularly reviews customers' accounts to make sure that their overdraft arrangements are appropriate. Overdraft limits are based on a customer's personal circumstances and can go up as well as down.
As part of these changes we have taken every opportunity to encourage customers to get in touch so we can review their banking needs and ensure they are in the best account for their individual circumstances.
The vast majority of our current account customers don't use their overdraft facility in an average month and for those that do they only go overdrawn for a few days usually at the end of the month. If these customers opt for our reward account they will be better off under the new structure as provided they pay in £1000 per month they will receive a payment of £5. For those customers who use their overdraft on a more regular basis we have specifically asked these customers to contact us so we can review their banking needs and ensure they are in the best account for their individual circumstances. We have a range of products and tools which can help these customers avoid these charges altogether.
We would advise any customer who is concerned about these changes to get in touch with us - we will always do everything we can to help.
Additional information:
In terms of the additional customers you are talking to many of them would benefit from changing to our reward current account or ultimate reward current account as they fund their account with £1k or more. As mentioned the Reward account comes with a £5 a month cash payment irrespective of balance and the Ultimate Reward comes with a £300 interest free overdraft. And for one of the customers where they regularly incur fees they would be better off under the new charging structure.
The new daily overdraft charging structure will take effect from December 2009.
This new simple charging structure is already in place on our Reward Account and customer feedback has shown that they find the daily overdraft charging structure clear and easy to understand.
Halifax writes to customers immediately to inform them that they have exceeded their arranged limit and again every seven days after they remain over their limit.
No charge is made if an account is brought into credit by the end of the banking day."
A little extra from the Halifax
For four years now consumer champion Martin Lewis has been campaigning about what he believes are legally unfair charges levied by banks when you go beyond your authorised overdraft limits.
Their charges have caused such outrage, that six million of you have downloaded his letter to help you claim them back. The Office of Fair Trading took the case to court to get a ruling. The case has dragged on for more than two years but the result of the case is now due before Christmas.
Whatever happens in the courts we have already seen banks having to bring down their unauthorised bank charges. However, one bank has used this as the perfect excuse to re-jig its entire overdraft structure.
In 2000 the Halifax pioneered its all singing all dancing TV ads making stars of its own staff. But nine years later, is anyone still singing? During last year's economic crisis, the bank faced collapse and had to merge with Lloyds and be rescued by a government handout.
Last month, the bank we now own a huge chunk of, repaid us by writing to its 10 million customers telling them that it was about to make their charges much simpler. With great fanfare it announced it would slash its unauthorised overdraft charges from £35 per transaction to a £5 a day. If you spend beyond your limit you will be better off which is good news.
However, for many other customers, who stick within their overdraft limits, it's a different story. For most customers, the Halfiax has chosen to ditch free overdrafts and replace all its interest charges with a flat fee. If you're within your limit and borrowing up to £2,500 it will cost £1 a day. If your overdraft is more than that it doubles to £2 a day.
Halifax says it's making things simple and conceptually it is, the problem is for some people it's simply going to cost a fortune. Imagine you slip £10 overdrawn without realising it until 20 days later when you get your statement, that'll mean you pay £20 on a £10 overdraft. In fact, for someone £10 overdrawn, £1 a day is equivalent to 36,500% interest per year.
These changes happen on 6 December, and many of the Halifax's customers will pay more.
While Halifax isn't the only bank that's starting to use this way of charging, the real problem is how much it could cost you. The Alliance and Leicester caps its maximum authorised overdraft fees at £5 a month, but with the Halifax it could be up to £60. What the Halifax is doing might be simple but it's a slap in the face for many customers who make sure they stick within their limits.
Find out more about the new Halifax charges on Martin Lewis' site.
The Halifax told Watchdog:"
In December 2008 we announced our intention to launch our new Reward Current Account in February 2009. The Halifax Reward Current Account replaced the traditional existing interest (credit/debit) and fee structure with a new approach based on simplicity and an even better deal for customers.
A market leading benefit
For the new account, credit interest was replaced by a cash payment of £5 per month irrespective of balance when accounts are funded with £1,000 or more a month - that's potentially £60 a year. Traditional arranged and unarranged overdraft fees and interest rates were replaced with a daily fee. Unlike other offerings on the market, the account does not require a cross product holding and there is no annual fee. The Halifax Reward Current Account is open to both new and existing customers. For overdrafts the new structure is as follows:
• Traditional unarranged overdraft fees were removed - no debit interest, no monthly unarranged overdraft charges and no fees for paid or unpaid items are applied. No charge is made if an account is brought into credit by the end of the banking day.
• Currently, for many Halifax customers the unarranged overdraft charge is £28 a month, with paid and unpaid item fees at £35 (subject to a maximum of three a day). The new Reward Current Account and daily overdraft charging structure does not feature these.
• Customers using an arranged overdraft of up to £2,500 will be charged £1 per day for each day they use their overdraft. The OFT study into 'Personal Current Accounts in the UK' published in July 2008 showed that around two-thirds of all active accounts don't use an arranged overdraft.
• For those using an arranged overdraft of over £2,500 a charge of £2 per day will be applied for each day they use their overdraft. The OFT study revealed that 95% of people who utilised an arranged overdraft had an average daily balance of less than £2,000.
• Customers who use an unarranged overdraft will be charged £5 each day they are over limit. We will write to customers immediately to inform them that they have exceeded their arranged limit and again every seven days after they remain over limit.
Informing customers of our changes.
In accordance with the banking code, we will always give customers at least 30 days notice of any changes. For many customers we will have given them significantly more time than this. We started to write to customers about the changes at the beginning of October and every affected customer will have been notified by the end of the month.
Overdraft limits
As a responsible lender; Halifax regularly reviews customers' accounts to make sure that their overdraft arrangements are appropriate. Overdraft limits are based on a customer's personal circumstances and can go up as well as down.
As part of these changes we have taken every opportunity to encourage customers to get in touch so we can review their banking needs and ensure they are in the best account for their individual circumstances.
The vast majority of our current account customers don't use their overdraft facility in an average month and for those that do they only go overdrawn for a few days usually at the end of the month. If these customers opt for our reward account they will be better off under the new structure as provided they pay in £1000 per month they will receive a payment of £5. For those customers who use their overdraft on a more regular basis we have specifically asked these customers to contact us so we can review their banking needs and ensure they are in the best account for their individual circumstances. We have a range of products and tools which can help these customers avoid these charges altogether.
We would advise any customer who is concerned about these changes to get in touch with us - we will always do everything we can to help.
Additional information:
In terms of the additional customers you are talking to many of them would benefit from changing to our reward current account or ultimate reward current account as they fund their account with £1k or more. As mentioned the Reward account comes with a £5 a month cash payment irrespective of balance and the Ultimate Reward comes with a £300 interest free overdraft. And for one of the customers where they regularly incur fees they would be better off under the new charging structure.
The new daily overdraft charging structure will take effect from December 2009.
This new simple charging structure is already in place on our Reward Account and customer feedback has shown that they find the daily overdraft charging structure clear and easy to understand.
Halifax writes to customers immediately to inform them that they have exceeded their arranged limit and again every seven days after they remain over their limit.
No charge is made if an account is brought into credit by the end of the banking day."
A little extra from the Halifax