Santander scraps unarranged overdraft fees on Choice Account
The bank has revamped its Choice Account, which can help limit the cost of regularly using an overdraft.
Santander has revamped its Choice Account, which is designed to help those that regularly stray into the red.
The current account used to cost £5 a month, with a £1 daily charge (for a maximum of ten days each monthly statement period) for using an arranged overdraft. This jumped to £5 a day (for a maximum of ten days each monthly statement period) for using an unarranged overdraft.
Now the account is slightly more expensive, charging £10 a month while the £1 daily fee on an arranged overdraft has been extended to a maximum of 20 days, but users no longer have to pay any unarranged overdraft fees.
So if a payment takes you into an unplanned overdraft for more than ten days, you could save up to £50 a month in charges. Over a year the saving could be up to £600.
Understanding overdrafts
Many current accounts come with an overdraft facility which enables you to make a payment even if there is no money in your account. There are two types; an arranged/authorised overdraft or an unarranged/unauthorised overdraft.
Overdraft charges can be tricky to understand as there are a number of phrases to get used to and banks are increasingly using fees rather than charging interest on your overdrawn balance. Here are four terms that you tend to hear about:
Arranged overdraft usage fee - a daily fee which is charged for using an arranged overdraft (one that you’ve already asked the bank to set up).
Unarranged overdraft usage fee – a daily fee which is charged when a payment causes you to exceed an arranged overdraft or when you don’t have an arranged overdraft already in place.
Paid transaction fee - a charge applied when a payment is made that makes you use an unarranged overdraft and the bank authorises the payment.
Unpaid transaction fee - a charge applied when a payment is declined by the bank that would take your account into an unarranged overdraft.
With the Santander Choice Account, users don’t have to pay any paid or unpaid transaction fees and from now on no longer have to shell out for unarranged overdraft fees.
You also don’t have to pay an arranged overdraft usage fee if your arranged overdraft is £12 or less.
Only an arranged overdraft over £12 will cost you with the Choice Account. But if you switch using the Santander Switcher Service, you could be eligible for a four months fee-free on top!
Compare current accounts with an overdraft facility
How the Choice Account compares
So how does the Choice Account compare to other Santander current accounts when it comes to overdraft charges? Below is a table outlining the charges for each of the main accounts.
|
Santander account |
Arranged overdraft usage fee |
Unarranged overdraft usage Fee |
Paid transaction tee |
Unpaid transaction fee |
Overdraft fee cap |
|
£1 a day (capped at 20 days in each monthly statement period) |
£5 a day |
£5 for each transaction |
£10 for each transaction |
£95 a month |
|
|
£1 a day (capped at 20 days in each monthly statement period) |
£5 a day (capped at 20 days in each monthly statement period) |
£25 for each transaction |
£25 for each transaction |
£150 a month |
|
|
Basic Account |
n/a* |
n/a* |
|
No fee |
£0 |
|
Choice Account |
£1 a day (capped at 20 days in each monthly statement period) |
No fee |
No fee |
No fee |
£20 |
*Arranged/Unarranged Overdraft not available on this product
So as you can see, the Choice Account is a good option if you're likely to fall into the red on a regular basis. That said, it's worth remembering that both the 23 Current Account and Everyday Current Account come with four month fee-free overdrafts. And looking beyond Santander, the Nationwide FlexDirect account for example offers a 12-month fee-free overdraft. On top of that you’ll get 5% credit interest on balances over £2,500 for a year too.
For more read Five places where you can get an overdraft for free.
Compare current accounts with an overdraft facility
Tackling unplanned overdrafts
Elsewhere other banks have features you can add to a bank account that can help limit the cost of unplanned overdrafts.
With the NatWest/RBS Select Account you can use an optional free service called Overdraft Control, which rejects payments that would take your account into an unarranged overdraft. And Lloyds offers Control, which costs £10 a month and stops Classic Account customers from accidently using an overdraft.
However, if you know that you are likely to go seriously in the red, something is clearly going wrong with your budgeting. An overdraft is still a form of debt, and should be treated as such - something to avoid! So why not make use of the lovemoney.com MoneyTrack tool to get a better grasp on exactly where your money is going.
More on current accounts:
How to switch your current account in 7 days
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