Barclays new overdraft fees will hit you hard

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Barclays 'regret' over memo

Is Barclays back to its bad old habits? Revised overdraft fees could see many customers charged up to four times the rate they previously paid. Barclays claims the new rates - for example, £1.50 a day on an authorised overdraft up to £2,000 - are easier to understand.

But the greater claimed clarity could hit your wallet if you're not careful. Time to switch bank accounts?

New charges

Let's look at the new charges. For authorised Barclays borrowing, these fees now stand at 75p per day for a £1,000 overdraft, £1.50 a day up to £2,000 while Barclays will charge you £3 a day above that amount.

To be fair, Barclays signalled the change earlier in the year, so customers' have had plenty of warning. Barclays has also snipped unauthorised borrowing costs by limiting its £8 unpaid transaction fee to a maximum of one a day. (Check Barclays full rates here.)

No to Payday

Do the new fees make a Payday loan, for example, more viable? Absolutely not. For example, a £750 loan borrowed for 7 days from Paydayloansinstant.co.uk would work out at £794. A total fee of £44 paid on top.

By comparison a £750 Barclays authorised overdraft would cost a customer £5.25 for the same time period. (The lack of one industry standard Payloan calculator that gives the best deal make hard-and-fast comparisons difficult - a situation the Competition and Markets Authority has criticised).

But if you're unhappy with Barclays' new fees, why not move?

First Direct and Nationwide options

For example, Nationwide offers a 12-month fees-free overdraft on its FlexDirect account, and 50p per day if you have an agreed overdraft (see details here). Quite a bit cheaper than Barclays.

However Which? claims First Direct offers the best deal overall. It says the annual cost of a £500 overdraft for two weeks each month would cost you £17 overall compared to £40 from Nationwide. See the full comparison list here.

Meanwhile Barclays says it has introduced text alerts helping customers avoiding fee each week, £15 buffer zones "and have completely eliminated multiple daily charges. Barclays is not making more money through these changes," it claims.