MARTIN LEWIS has issued an urgent warning to millions of Lloyds Banking Group customers over a major change to its accounts.
The consumer champion said Lloyds, including subsidiaries Halifax and the Bank of Scotland, are shaking up the way they charge interest on overdrafts.
The banking group has introduced a new tiered system, which means that a number of customers will see the interest on their agreed overdrafts increase or decrease.
Previously, customers had a rate of 27.5%, 39.9% or 49.9%, but this has now been increased to a total of five levels.
All Lloyds, Bank of Scotland and Halifax customers with an overdraft will now have a rate of 19.9%, 29.9%, 34.9% (for six months), 39.9% or 49.9% , or switch to a tariff.
In a post on X, formerly Twitter, Martin said: “Lloyds, Halifax, Bank of Scotland customer? It could be about increasing your overdraft to 50%.”
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Lloyds Banking Group said the “majority” of its customers will see interest rates on their overdrafts flat or reduced.
It has not yet been confirmed how many of them will see interest charges on overdrafts increase.
If your rate is going to increase, you will receive 60 days’ notice of the change – and the rate will increase starting in August.
If this happens to you, you will receive a rate of 34.9% for six months. Your rate will then increase again to 39.9% or 49.9%.
Anyone whose rate drops will receive seven days’ notice, after which the lower rate will come into effect.
Below is the full list of bank accounts affected by the changes:
Bank of Scotland:
- Platinum account
- Silver bill
- Classic account
Lloyd’s:
- Classic account
- Club Lloyds account
- Silver bill
- Club Lloyds Silver account
- Club Lloyds Platinum account
APR: What it is and how it works
APR – or Annual Percentage Rate – refers to the total cost of your loan for one year.
APR is based on the card purchase interest plus standard fees.
This rate does not include other fees, such as cash transactions or transfer fees.
APR can help you compare credit products, such as loans or credit cards, on a like-for-like basis.
When you search for a loan, for example on a price comparison site, the different loan options are often ranked by representative APR.
When a loan is advertised with a “representative APR,” it means that at least 51% of customers must receive a rate equal to or less than the representative APR.
It can be easy to assume that the lender with the lowest representative APR you find advertised will give you the best rate.
However, when you sign up, you will likely receive a personalized APR based on your circumstances.
This can be the same, higher or lower than the representative APR.
Halifax:
- Ultimate reward current account
- Current account reward
- Current account
The latest change comes after millions of credit card customers were urged to check their accounts with lenders who increased interest charges.
An investigation by The Sun last month found that some providers have increased the interest on their cards by 11% over the past decade.
Lenders have increased interest rates on mortgages and credit cards in recent months following the Bank of England’s base rate hikes.
The base interest rate is currently 5.25%.
What should you do if you are a Lloyds customer?
The first and most obvious way to avoid the increases is to not have an overdraft at all.
Not only will you have to deal with the extra costs if you choose to overdraft; it can be difficult to get rid of this, as with any debt.
Another option is to transfer checking accounts to a bank or building society that offers a lower interest rate on overdrafts.
Not only that, but some banks will also pay you free cash if you switch to one of their checking accounts.
All you have to do is make the switch via the Current Account Switching Service (CASS).
Andrew Hagger, from Moneycomms, previously told The Sun: “Most banks now charge between 35% and 40% for agreed overdrafts, but depending on how much you borrow, First Direct could be an option worth considering if the first £250 of any agreed overdraft is interest free.”
Other banks offering competitive interest rates on arranged overdrafts include Starling and Monzo, with rates starting from 15% depending on your credit status.
Another option, according to Mr Hagger, is a credit card, but be careful not to take on more debt.
Although the interest charged on them is usually less than an overdraft, and sometimes even nothing at all for a certain period, they often have much higher spending limits.
He said: “Consider a 0% discount credit card and instead put the amount you currently spend on overdrafts on your credit card – if you pay off the statement balance in full you won’t pay any interest charges.
“Even if you can’t pay off the card in full, most cards currently charge around 24.9% APR on purchases, so much less than your potential Lloyds overdraft.”
The exact credit card rate you get depends on the provider and your credit history.
You can find the best deals on buying credit cards by using comparison sites like GoCompare and Compare the Market.
Before you apply, use an eligibility checker to find out how likely you are to be accepted without damaging your credit score.
Borrowing through credit cards and overdrafts can be useful to help cover unexpected costs. But using them to pay everyday bills can lead to you getting into debt.
If you can’t afford to pay off the debt you have, avoid taking on more debt.
It is always important to ask yourself whether you actually need to borrow before taking out a new credit card, personal loan or overdraft.
If you need cash quickly in an emergency, it’s helpful to have savings to fall back on, but that’s not always possible.
It’s worth considering a credit union. They are a much cheaper alternative to payday loans, and some can even get cash to you on the same day.
The interest offered on these loans is significantly lower than that on a credit card or overdraft.
Before borrowing cash, do your research and find out what the cheapest option is for you.
Also remember that if you are struggling to pay your bills and have fallen into debt, there are a number of free helplines you can call for advice.
- National Debt Line – 0808 808 4000
- Citizen advice – 0800 144 8848
- StepChange Debt Charity – 0800 138 1111
Do you have a money problem that needs to be solved? Get in touch by emailing money-sm@news.co.uk.
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories