HSBC overdraft charges to be hiked for customers from March next year

The bank is to impose the new interest rate on all of its customers from 14 March 2020.

Increasing charges

As of March next year, all HSBC account holders will be moved to a new flat-rate interest charge of 39.9 per cent for both arranged and unarranged overdrafts - an increase from the current rates between 9.9 and 19.9 per cent.

Do you have an overdraft with HSBC? | Other 3rd Party

The changes mean that the majority of customers who have gone into their arranged overdraft will be worse off once the new rates come into effect.

However, it is set to scrap its £5 daily usage fee for unarranged overdrafts, with the maximum monthly cost for using one due to fall to £20.

The bank is also introducing an interest free £25 buffer for arranged overdrafts on its bank account and advance bank account.

Better for customers?

HSBC is to impose the new interest rate on all of its customers from March 2020 | Other 3rd Party

The changes come amid new rules being introduced by the Financial Conduct Authority from 6 April that will see banks banned from charging rip-off overdraft fees - although they can still charge interest.

HSBC claims that the changes mean seven in ten customers who use an overdraft will either be better off or their payments will remain the same.

However, Helen Saxon, banking editor at MoneySavingExpert.com, argued most customers will actually be worse off.

She explained: “It’s a definite step forward to cut punishing overlimit fees and to make overdraft costs more transparent.

“But this change will actually make most people who are in their arranged overdraft, and who owe more than £25, worse off - whichever HSBC account they hold.

“Fortunately, though, there are still banks out there, like First Direct and Starling, offering lower overdraft rates - at least for now.

“If you’re hit by HSBC’s changes, see if you can switch to an account with a cheaper overdraft.”

Changes to accounts

These are the changes set to be introduced for the following HSBC accounts:

Bank account, graduate bank account, current account

Current charges: 19.9 per cent for arranged overdrafts and £5 per day for unarranged overdrafts. Charges capped at £80 per month New rates: 39.9 per cent for arranged and unarranged overdrafts. Charges capped at £20 per month. There will be no charges for the first £25 of an arranged overdraft with the bank account.

HSBC advance bank account

Current charges: 17.9 per cent for arranged overdrafts and £5 per day for unarranged overdrafts. Charges capped at £80 per month. New rates: 39.9 per cent for arranged and unarranged overdrafts. Charges capped at £20 per month. There will be no charges for the first £25 of an arranged overdraft.

HSBC premier bank account

Current charges: 11.9 per cent for arranged and unarranged overdrafts. Charges capped at £500 per month. New rates: 39.9 per cent for arranged and unarranged overdrafts. Charges capped at £20 per month.

HSBC Jade

Current charges: 9.9 per cent for arranged and unarranged overdrafts. Charges capped at £2,000 per month. New rates: 39.9 per cent for arranged and unarranged overdrafts. Charges capped at £20 per month.