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 brought in a new tiered system, meaning a number of customers will see the interest rates on their arranged overdrafts go up or down.
Previously, customers were on a rate of 27.5%, 39.9% or 49.9%, but this has now been increased to five tiers in total.
All Lloyds, Bank of Scotland and Halifax customers with an overdraft will now be on, or moved to, a 19.9%, 29.9%, 34.9% (for six months), 39.9% or 49.9% rate.
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In a post on X, formerly Twitter, Martin said: "Lloyds, Halifax, Bank of Scotland customer? It could be about the increase your overdraft to 50%."
Lloyds Banking Group said the "majority" of its customers will see the interest rates on their overdrafts stay the same or go down.
It has not confirmed how many will see their overdraft interest charges go up.
If your rate is due to go up, you will be given 60 days' notice of the change - and the rate will rise from August.
If this happens to you, you will be put on a 34.9% rate for six months. Then, after that, your rate will rise again to 39.9% or 49.9%.
Anyone whose rate is going down will be given seven days' notice, with the lower rate coming into effect after that.
Below is the full list of bank accounts that are impacted by the changes:
Bank of Scotland:
- Platinum Account
- Silver Account
- Classic Account
Lloyds:
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- Classic Account
- Club Lloyds Account
- Silver Account
- Club Lloyds Silver Account
- Club Lloyds Platinum Account
Halifax:
- Ultimate Reward Current Account
- Reward Current Account
- Current Account
The latest change comes after millions of credit card customers were urged to check their accounts with lenders hiking interest charges.
An investigation by The Sun last month found some providers have raised the interest charged on their cards by 11% in the last 10 years.
Lenders have been hiking rates on mortgages and credit cards in recent months following Bank of England base rate hikes.
The base rate currently stands at 5.25%.
What to do if you are a Lloyds customer
The first and most obvious way to avoid the hikes is to opt out of having an overdraft option at all.
Not only will you be hit with the added fees by opting for an overdraft - they can be hard to get out of, like any debt.
Another option is to switch current accounts to a bank or building society offering a lower interest charge on the overdraft.
Not only that, but a number of banks will pay you free cash to switch to one of their current accounts.
You just have to make the switch using the Current Account Switch Service (CASS).
Andrew Hagger, from Moneycomms, previously told The Sun: "Most banks now charge between 35% and 40% for agreed overdrafts, but depending how much you borrow, First Direct may be an option worth considering as the first £250 of any agreed overdraft is interest free."
Other banks offering competitive interest charges on arranged overdrafts include Starling and Monzo, with rates from 15%, dependent on your credit status.
Another option, according to Mr Hagger, is a credit card - though beware of getting in to more debt.
While the interest charged on them is usually less than an overdraft, and sometimes even nothing at all for a set period, they often have much higher spending limits.
He said: "Consider a 0% purchase credit card and put what you currently spend on your overdraft on your credit card instead - if you pay off the statement balance in full you won't pay any interest charges.
"Even if you can't pay the card in full most cards currently charge around 24.9% APR on purchases, so way less than your potential overdraft bill from Lloyds."
The exact credit card rate you get will vary depending on the provider and your credit history.
You can find the best deals on purchase credit cards by using comparison sites like GoCompare and Compare the Market.
Before applying, 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 if you're using them to help pay everyday bills this can lead you into debt.
If you can't afford to pay off the debt you have, then avoid taking on any more.
It’s always vital to ask yourself if you actually need to borrow before committing to a new credit card, personal loan or overdraft.
If you need cash quickly in an emergency then it's useful to have savings to fall back on, though that's not always possible.
It is 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 rate offered on these loans is substantially lower than that offered on a credit card or overdraft.
Before you borrow cash, do your research and find out the cheapest option for you.
Remember too, if you are struggling to pay for your bills and have fallen into debt, there are some free helplines you can call for advice.
- National Debtline - 0808 808 4000
- Citizens Advice - 0800 144 8848
- StepChange Debt Charity - 0800 138 1111
Do you have a money problem that needs sorting? 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