TSB to introduce 39.9% overdraft interest rate

TSB to introduce 39.9% overdraft interest rate

TSB is the latest bank to announce overdraft fee changes.

 

Brean Horne
Tue, 01/21/2020 – 12:10

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TSB will introduce a fixed interest rate fee of 39.9% on arranged and unarranged overdrafts from 2 April 2020. 

Customers with an arranged overdraft currently pay a £6 monthly usage fee and have a £35 fee-free buffer.

Those who use an unarranged overdraft pay £5 per day if they’re overdrawn by £10 to £25 or £10 a day for sums over £25.

From 2 April the bank will scrap all daily and monthly fees as well as removing the £35 fee-free buffer.

TSB estimates that 70% of its customers will pay the same or less of their overdraft once the changes come into effect.

Why is TSB increasing its overdraft fee?

Lenders make more than £2.4 billion from overdrafts each year, with about 30% of this coming from unarranged overdrafts, according to the Financial Conduct Authority. The financial watchdog has unveiled new plans to overhaul the industry.

From 6 April 2020, banks and building societies will no longer be able to charge higher interest rates on unarranged overdrafts than they do on arranged overdrafts.

They will also be banned from charging additional fixed fees.

Instead, lenders will have to use a simple interest rate to make overdrafts “simpler, fairer and easier to manage.”

How does TSB’s new overdraft fee compare?

TSB will introduce a flat fee of 39.9% for its overdrafts, making it one of the more expensive banks to use.

Customers will be charged a flat interest rate of either 15%, 25% or 35% depending on their credit score.

The table below shows how TSB’s fee for a £100 overdraft compares to other lenders. Starling Bank currently offers the cheapest overdraft fee.

Bank New overdraft fee Charge over 7 days Charge over 30 days
Nationwide 39.90% 65p £2.79
HSBC 39.90% 65p £2.79
first direct 39.90% 65p £2.79
M&S Bank 39.90% 65p £2.79
TSB 39.90% 65p £2.79
NatWest 39.48% 64p £2.77
RBS 39.48% 64p £2.77
Barclays 35% 57p £2.49
Monzo 19%/29%/39% 33p/49p/63p £1.44/£2.11/£2.74
Starling Bank 15%/25%/35% 27p/43p/59p £1.16/£1.86/£2.52

How to cut the cost of your overdraft

Overdrafts can be handy for short-term borrowing.

To make sure you get the best rate on your overdraft, it’s important to shop around.

While banks are starting to introduce single flat interest rates, there is some competition in the market.

Starling Bank and Monzo, for example, offer the cheapest interest rates for eligible customers at 15% and 17% respectively.

Barclays will also keep it’s £15 interest-free buffer which could help cut the cost of going into an overdraft.

If you have a bigger overdraft, a specialist money transfer credit card could help reduce your overdraft repayments.

A money transfer card allows you to move money from your credit card to your bank account.

These cards often come with an initial transfer fee and a fixed 0% interest period.

Tesco Bank currently offers the longest 0% interest period of 28 months.  

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Drivers charged £55 more on average for paying car insurance monthly

Drivers charged £55 more on average for paying car insurance monthly

UK motorists face higher bills if they pay for car cover monthly.

Brean Horne
Tue, 01/21/2020 – 11:34

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Drivers who pay for car insurance monthly are charged £544 million more for cover than those who pay annually, according new data from GoCompare.

The price comparison website found that paying monthly increases the cost of the average car policy by 11.8% – adding an extra £55.36 over a year.

While some insurers add as little as 5.8% for monthly premiums, others charge as much as 17% extra.

The figures show that 31% of drivers pay monthly, rather than annually, for their car insurance.

Of those choosing to pay in instalments, a third (33%) are less likely to switch providers which could cost them more over time.

Almost half (47%) of all drivers from lower income households pay monthly for their car cover compared to just 29% of those from the highest earners.

Lee Griffin, chief executive at GoCompare, says: “Car insurance is always cheaper when you pay one annual payment, but drivers who can’t afford to do that are hit by additional costs. 

“The added danger here is that people paying monthly are statistically more likely to renew again with the same insurer, without checking the total cost.

“It can become a cycle of paying more, for people who can least afford to do that.

Why is paying for car insurance monthly more expensive?

Paying monthly for car cover is essentially taking out a loan from your car insurance provider.

As a result, it will charge you interest on your monthly instalments, making your policy more expensive.

How to cut the cost of car insurance

If you currently pay monthly for cover, these tips could help you cut the cost of your car insurance.

1) Switch to annual payments

Paying annually for car insurance will make your premium cheaper.

This is because you’re making a one-off lump sum rather than instalments which will be subject to interest.

2) Shop around

If paying monthly is your only option, it’s really important to shop around for the best deal.

Price comparison websites are a great starting point and allow you to compare hundreds of deals quickly and easily.

They will also allow you to compare how much the monthly instalment interest rates vary between providers.

3) Get a 0% purchase credit card

You could spread the cost of your car insurance payments by getting a 0% purchase credit card.

This will allow you to pay for your insurance all in one go and then set up a direct debit to clear the total payment over 12 months.

The best deal on the market right now is the MBNA Purchase Credit Card which offers 0% interest on spending over 26 months.

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Ten-year strategy to make Britons better off launched

Ten-year strategy to make Britons better off launched

Goals include increasing the number of savers by two million and reducing the reliance on credit cards for day-to-day spending

Stephen Little
Tue, 01/21/2020 – 11:11

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The government has put forward a new 10-year plan to help transform the nation’s financial health by getting more people to save regularly.

The Money and Pensions Service (Maps) has launched a strategy with five “agendas of change” to help improve financial wellbeing for millions of people by 2030.

According to Maps, about 11.5 million people currently have less than £100 in savings to fall back on, while nine million people often use credit to pay for food or essential bills.

Maps wants to increase the number of people saving regularly by two million to 16.7 million.

It also set a target of two million fewer people using credit to pay for food or bills by 2030.

Maps says that people who have financial wellbeing are less stressed about money, which in turn has positive effects on their health, relationships and work.

The goals include increasing the number of children receiving financial education by two million to 6.8 million and better debt advice for two million more people as currently only 32% of those who need debt advice have access to it.

It also wants to improve the number of people who understand later life planning by five million.

Caroline Siarkiewicz, acting chief executive of Maps, says: “Financial wellbeing underpins personal health and happiness, but it doesn’t happen by chance.

“We’re launching a strategy for entire lifetimes, aiming to expand financial education for children while ensuring everyone is equipped to plan for and enjoy their retirement.”

Key initiatives include increasing the availability of affordable credit, more payroll savings products, and an expansion of free debt advice for when people are in crisis.

The government abolished the Money Advice Service in 2016 over concerns that it was not delivering value for money. It merged with Pension Wise and The Pension Advisory Service to form Maps in 2019.

Commenting on the launch, Steven Cameron, pensions director at Aegon, says: “Many people are living life on a financial cliff edge with debt and loans, coupled with the burden of financial obligations and commitments, impacting their ability to control their finances and respond to financial unpredictability. Improving financial wellbeing is a win-win for individuals, employers and the UK economy.

“It’s important that any strategy factors in the benefits of advice. While information and guidance may often be what people need, it’s vital that people also know when and where to go when they need expert help from a professional financial adviser.”

Guy Rigden, chief executive of financial education charity MyBnk adds: “Millions has been spent testing the effectiveness of financial education so we know what is needed at many levels. The 2020s can be the decade young people finally receive the meaningful financial education they deserve and society needs.

“Instead of choosing prevention or cure, it has rightly prescribed both.”

 

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