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Monzo and Starling raise overdraft fees, following HSBC, Nationwide and First Direct

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.

Nationwide implemented changes from 11 November 2019 and are charging 39.9% APR, with First Direct also opting for 39.9% and the removal of their £5 daily charge.

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