Bank of Scotland customers face higher overdraft charge

STING in tail of plan for any who slip into red by small amount, writes Jeff Salway.

Bank of Scotland customers face higher charges for going overdrawn from October, despite an increase to the amounts by which they can go into the red without paying.

Classic, Gold, Silver and Platinum account holders will from 2 October be able to go overdrawn up to specific amounts without incurring interest charges or fees as part of changes set out today.

The move, which also applies to Lloyds TSB accounts, is designed to help those who slip into the red by small amounts, said the bank.

But experts have warned of an expensive sting in the tail for those who go above their agreed limits, while the bank is also hiking some monthly current account fees.

Classic and Silver account users will get authorised or planned overdrafts of up to £25 and £50 respectively without being charged. On the Gold and Platinum accounts the interest and fee-free amount is being increased by £50 to £150 and £300 respectively.

The limits are on top of the £10 buffer on all Bank of Scotland current accounts, which means anyone going into overdraft by £10 or less can escape charges.

Jatin Patel, director of current accounts for Bank of Scotland, said: “With the introduction of interest and fee-free overdraft facilities across our whole range of mainstream current accounts, all customers can now also enjoy peace of mind that should they dip into their planned overdraft in the month they can avoid incurring charges.”

But it will become more expensive to go above the new fee-free limits. The interest charge on the free Classic account goes up from 19.28 to 19.94 per cent. Those in the Silver and Gold accounts will also have to pay 19.94 per cent, up from the current charges of 18.86 and 17.32 per cent respectively. The biggest rise in overdraft costs is on the £17-a-month Platinum account, where the overdraft rate will be bumped up from 12.28 to 17.28 per cent.

Those charges compare with an average authorised overdraft rate across all current account providers of 15.2 per cent.

The monthly fee on Bank of Scotland’s Silver and Gold accounts will be increased from £7.95 to £9.95 and £12 to £12.75 respectively.

The bank came under fire in 2009 when it introduced a £1-a-day charge on planned overdrafts up to £2,500. Now it has been accused by Moneyfacts of “hiding bad news” in its latest announcement: “Bank of Scotland has certainly increased its free overdraft across its range, but has made sure that it is not so generous as to stop anyone ever going beyond it,” said spokeswoman Sylvia Waycot.

“The increased bank charges are made the more irritating because there is no explanation as to why the bank has decided to increase these charges across its current account range. The lasting impression for most customers will not be that overdrafts became cheaper, but that they cost more,” she added.

October’s changes will benefit Bank of Scotland customers who can stay within the new limits, said David Black, head of banking at Defaqto.

“The losers will be those whose authorised overdrafts exceed the interest-free overdrafts by a reasonable margin because of the increased overdraft interest rates,” he added.

The £10 buffer means that a £160 overdraft on the Gold account would be free of charge. Go £2 above that, however, and customers will be charged on the £12 above the new £150 limit.