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| Overdrafts: Why you shouldn't ignore that message from your bank about fees | Overdrafts: Why you shouldn't ignore that message from your bank about fees |
| (about 1 hour later) | |
| If you recently ignored a text from your bank with something about "fees", you might soon wish you hadn't. | If you recently ignored a text from your bank with something about "fees", you might soon wish you hadn't. |
| If you use an overdraft, how much you pay could be about to drastically change. | If you use an overdraft, how much you pay could be about to drastically change. |
| That's because new rules have come in that some experts have called the biggest overhaul in fees for a generation. | That's because new rules have come in that some experts have called the biggest overhaul in fees for a generation. |
| For many of us, it means we'll likely save a few quid every month. But for some it could get a lot more costly to go into debt. | For many of us, it means we'll likely save a few quid every month. But for some it could get a lot more costly to go into debt. |
| Young people, specifically 16-24-year-olds, are the group who use an arranged overdraft the most and 44% have dipped into theirs during the past 12 months. | |
| Many of the major banks have now announced their new charges and how they'll dish them out. | Many of the major banks have now announced their new charges and how they'll dish them out. |
| Newsbeat's found 10 major UK banks that will now charge almost 40% interest for going into the red. | |
| The new rules kick in on 6 April, so there's a bit of time to make a plan. | |
| What's going to happen? | What's going to happen? |
| Banks are being forced to charge a simple annual interest rate (APR) on all overdrafts - so if you use an arranged or unarranged overdraft you will get a set rate. | Banks are being forced to charge a simple annual interest rate (APR) on all overdrafts - so if you use an arranged or unarranged overdraft you will get a set rate. |
| The Financial Conduct Authority (FCA), the people who regulate banks, brought in the changes. | The Financial Conduct Authority (FCA), the people who regulate banks, brought in the changes. |
| Their aim was to stop people getting charged big daily fees for dipping into their overdrafts. | Their aim was to stop people getting charged big daily fees for dipping into their overdrafts. |
| From now on banks also need to tell you clearly what the overdraft charges are. | From now on banks also need to tell you clearly what the overdraft charges are. |
| The FCA told Newsbeat their reforms fix the market "where too often the vulnerable were missing out because of complex and disproportionate charges". | The FCA told Newsbeat their reforms fix the market "where too often the vulnerable were missing out because of complex and disproportionate charges". |
| They say it will especially help people who dip into unarranged overdrafts - borrowing not agreed in advance. | They say it will especially help people who dip into unarranged overdrafts - borrowing not agreed in advance. |
| Am I going to be a loser? | Am I going to be a loser? |
| "People who have arranged overdrafts which they use regularly or long term will pay a truly awful price," according to BBC Money Box presenter Paul Lewis. | "People who have arranged overdrafts which they use regularly or long term will pay a truly awful price," according to BBC Money Box presenter Paul Lewis. |
| The FCA reckon most people will now avoid unexpected costs, but admit there is a significant group of people who will miss out. | The FCA reckon most people will now avoid unexpected costs, but admit there is a significant group of people who will miss out. |
| For example, someone who's set up a £1,000 overdraft limit with their bank. | For example, someone who's set up a £1,000 overdraft limit with their bank. |
| The rates on these overdrafts are currently around 16% - 20%. | The rates on these overdrafts are currently around 16% - 20%. |
| Many of the big banks are raising that figure to around 40%. | Many of the big banks are raising that figure to around 40%. |
| So in the case of a maxed-out £1,000 arranged overdraft, the annual interest would jump from around £180 to almost £400. | So in the case of a maxed-out £1,000 arranged overdraft, the annual interest would jump from around £180 to almost £400. |
| Who's the winner? | Who's the winner? |
| Paul says the winners are "people who accidentally (or on purpose) go a bit over what they are allowed for a short time". | Paul says the winners are "people who accidentally (or on purpose) go a bit over what they are allowed for a short time". |
| This is often those on daily fees, for example £5 a day, for just being a few pounds overdrawn. | This is often those on daily fees, for example £5 a day, for just being a few pounds overdrawn. |
| Also benefitting are those people who dip into their unarranged overdrafts - the borrowing you've not agreed with your bank. | Also benefitting are those people who dip into their unarranged overdrafts - the borrowing you've not agreed with your bank. |
| Many of those charges will be capped at around £20 a month. | Many of those charges will be capped at around £20 a month. |
| The FCA told us these unarranged overdraft fees "are often ten times as high as charges for payday loans". | The FCA told us these unarranged overdraft fees "are often ten times as high as charges for payday loans". |
| What does this mean for everyone? | What does this mean for everyone? |
| Overdraft buffers are being cut by many banks such as Nationwide, TSB and Monzo. | Overdraft buffers are being cut by many banks such as Nationwide, TSB and Monzo. |
| That's the amount you can go into your overdraft, before the fees kick in. | That's the amount you can go into your overdraft, before the fees kick in. |
| Overdrafts are big business. | Overdrafts are big business. |
| In 2017, banks made more than £2.4bn from them - with 30% alone coming from unarranged overdrafts. | In 2017, banks made more than £2.4bn from them - with 30% alone coming from unarranged overdrafts. |
| These figures are likely to drop, so they want to make gains elsewhere. | These figures are likely to drop, so they want to make gains elsewhere. |
| What's been the surprise knock on effect? | What's been the surprise knock on effect? |
| The FCA wanted to create a simple fixed rate of overdraft for punters. | The FCA wanted to create a simple fixed rate of overdraft for punters. |
| However the 40% rate, which has been set by many banks, seems to have taken many by surprise. | However the 40% rate, which has been set by many banks, seems to have taken many by surprise. |
| Some accounts have higher annual rates - up to 49%. | Some accounts have higher annual rates - up to 49%. |
| Many campaigners wanted the banks to be forced to stop charging people more interest than they had borrowed. | Many campaigners wanted the banks to be forced to stop charging people more interest than they had borrowed. |
| Step Change is a charity that helps people who run into debt. | Step Change is a charity that helps people who run into debt. |
| They told us young people are a growing and significant proportion of who they deal with on issues connected with overdrafts. | They told us young people are a growing and significant proportion of who they deal with on issues connected with overdrafts. |
| They say people in their 20s and 30s made up "two thirds of our clients in the first 6 months of 2019 - compared to just a quarter of the population". | They say people in their 20s and 30s made up "two thirds of our clients in the first 6 months of 2019 - compared to just a quarter of the population". |
| Follow Newsbeat on Instagram, Facebook, Twitter and YouTube. | Follow Newsbeat on Instagram, Facebook, Twitter and YouTube. |
| Listen to Newsbeat live at 12:45 and 17:45 weekdays - or listen back here. | Listen to Newsbeat live at 12:45 and 17:45 weekdays - or listen back here. |