Barclays overhauls overdraft fees

Barclays is to re-jig its unauthorised overdraft charges, as pressures mount on banks on how fair their current account fees are.

The bank is introducing a flat £8 fee for each bounced or guaranteed transaction that puts people over their overdraft limit – with a maximum of five charges a day worth £40 levied.

Current overdraft fees stand at £30 per paid referral fee and £35 per unpaid fee – capped at three per month and one per cent respectively.

Barclays is also bringing in a 'Personal Reserve' feature of £250 on top of a standard overdraft that can be used for a single fee of £22 for five working days.

A spokesperson for Barclays explained in the short-term the bank would now not be making as much money from the charges, but in the long term it was looking to attract more customers.

"Our customers wanted a simple, clear way of managing payments when they go beyond agreed limits," said Mark Parsons, managing director of current accounts at Barclays.

"Our new approach has been tested with consumers extensively over the last two years and we are confident that our products will promote account switching to Barclays."

Behind the change in the overdraft draft charges, Barclays is introducing a new range of five current accounts – three with monthly fees for running the accounts – ranging from £3 to £25.

The accounts with fees offer higher interest rates on balances, limited interest free overdrafts and insurance deals.

The no-fee accounts will offer no interest on balances – although the existing rate is just 0.1 per cent.

Pressure has been growing on banks over unauthorised overdraft fees as consumers try to claim back penalties they deem to be unfair.

The Office of Fair Trading (OFT) is now lining up against in the high street banks in a case over whether the watchdog can say if the fees are fair.

However, Barclays denies it was under pressure to cut fees because of the case, as it claims the new system of accounts has been in the pipeline for two-years.

Andrew Hagger of Moneynet.co.uk said: “With bank charges still very much on the agenda as the OFT court case rumbles on, Barclays has announced some radical changes to its current account range.

“It is definitely a move in the right direction to see that customers will be given the flexibility of a 'Personal Reserve' facility which will allow them to exceed their agreed overdraft facility within an agreed limit for up to five days and be charged a one off flat fee of £22.

"This is a vast improvement on some other high street accounts where you are subject to an unauthorised fee of up to £28 plus additional interest and/or charges of up to £20 per day."

He added: "Let’s hope this is just the start and that other financial institutions respond with equally competitive and less punitive deals."

Research out yesterday reveals many Brits want free banking to remain – and are willing to accept some fees for overdrafts.

Daniel Barnes