Lloyds hammers cash-strapped customers by hiking the cost of slipping into the red

June 16, 2012 by admin
Filed under Overdrawn Fees Articles

By
Daily Mail Reporter

PUBLISHED:

05:40 EST, 16 June 2012

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UPDATED:

05:40 EST, 16 June 2012

Britain’s biggest bank will hammer millions of cash-strapped families by hiking the cost of slipping into the red.

State-backed
giant Lloyds will make 17million customers pay 20 per cent more to set
up an overdraft and is raising rates to a whopping 19.94 per cent.

The
new rate is the highest charged by any of the big five banks and makes
dipping into your overdraft more expensive than spending on a credit
card.

Hikes: Lloyds is increasing the cost of setting up an overdraft

Experts
say the hikes, which take effect on October 2, are unfair on loyal
customers battling record low savings rates and a painful income
squeeze. And they come despite the Bank of England freezing the base
rate at its historic low of 0.5 per cent for more than three years.

Marc
Gander, founder of campaigners Consumer Action Group, said: ‘This is a
nasty, cynical move and is catastrophic for families, who are being
forced to rely on overdrafts far more because of a financial crisis
created by the banks.’

Lloyds is Britain’s biggest provider of current accounts with 22million customers including its Halifax arm.

With
the financial crisis in the eurozone spilling into Britain, bank
profits have come under threat. As a result, they are trying to squeeze
more out of customers who run out of cash at the end of the month.

Currently,
Lloyds customers who arrange to have an overdraft pay between 12.43 and
19.28 per cent, depending on the type of account they are in. Customers
also pay £5 a month for the right to be overdrawn.

From
October, the rates on all accounts will increase to a minimum of 15.43
per cent, rising as high as 19.94 per cent. The monthly cost increases
to £6.

Those
hit with the biggest interest rate are customers in Lloyds’ Classic
account. This is a free account and is most likely to be used by
cash-strapped customers.

It means that on each £1,000 borrowed for a year, they will pay £199.40 before any debt is scratched off.