Santander to overhaul overdraft charges on current accounts

There’s good news and bad news for millions of Santander current account holders.

Santander is making changes to the overdraft charges on many of its current accounts.

The shake-up will impact anyone with a 123, Everyday, Premier, Premier Direct (with travel insurance) or International Student account from 19th August.

Overdraft charges that apply to other Santander accounts will remain the same.

The Spanish-owned bank said it was revamping its fees "following recent competitor moves and would contact customers accordingly.

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What’s changing?

Below is a table detailing what impacted account holders pay now and what they will pay from 19th August.

*No usage fee is incurred for an arranged overdraft of £12 or less

**No usage fee is incurred for an unarranged overdraft of £12 or less

***Paid Transaction Fees-these are charged by a bank when it makes a payment which would put you in an unarranged overdraft or pushes you into one.

****Unpaid Transaction Fees- these are charged when a bank refuses to make a payment that would take you into an unarranged overdraft or push you into one.

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Good news and bad news

As you can see there’s good news and bad news in the overhaul.

Unpaid and Paid Transaction Fees are being reduced from £25 to £10 – this means they will pay less for payments that bounce and the charges will build up at a much slower rate, while the charges are being scrapped altogether for 123 Current Account holders.

However, to offset these cuts Santander has made changes elsewhere.

The bank has increased the Unarranged Overdraft Usage Fee from £5 to £6 a day for all accounts (bar the International Student account, which doesn’t come with the option for an overdraft). Everyday, Premier and Premier Direct customers will also see the £100 monthly cap removed for these charges (123 account holders never had this cap).

The £20 monthly cap on Arranged Overdraft Usage Fees (which will still cost £1 a day) is also being dropped for 123, Everyday, Premier and Premier Direct customers. So customers could pay up to £11 a month more for overdrafts the bank has already agreed to.

Despite the raft of changes the monthly cap on fees remains the same across all accounts, but depending on your circumstances you could end up paying more.

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Overdrafts in the spotlight

Santander's changes come after the Financial Conduct Authority announced that borrowers were paying too much for their overdrafts, and that it would investigate the issue.

Similar changes at Barclays mean customers who use their overdraft regularly will be hit by higher charges from 16th June but those that only occassionally dip into the red will be better off.

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Cheaper options

Santander's new fee structure on selected accounts will mean some will pay more for their overdrafts.

If you want a cheaper deal you might benefit from switching to the Santander Choice Account, which was also recently overhauled to make it cheaper for those that regularly stray into the red.

Alternatively you could switch bank altogether.

The Nationwide FlexDirect Account offers a fee-free overdraft for a year, while First Direct offers a £250 interest-free overdraft on its 1st Account and the Co-operative Bank offers £200 interest-free on its Current Account Plus deal.

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More on current accounts:

M&S Bank launches fee-free current account

The winners and losers of the Current Account Switch