21 June 2007
Current accounts with first direct, which are already subject to a 10 monthly fee unless customers take out an additional financial product with the bank, or pay in 1,500 per month, or have an average of 1,500 in their account, are set to go through further changes, with new overdraft arrangements costing consumers an additional 25 per request.
As one of the first banks to bring in a monthly charge for current account customers, first direct received a lot of criticism.
The good news for first direct customers is that it is lowering its unauthorised overdraft rates from 19.9% to 12.9% and customers are allowed to dip into their unauthorised overdraft once every six months without incurring a penalty.
Unfortunately, to offset these costs the bank is charging existing customers 25 to set up new authorised overdrafts and authorised overdraft rates will now increase by 2% from 10.9% to 12.9%. Customers who dip into their overdraft more than once in six months without being authorised will also be charged 25 each time.
Mike Naylor, Personal Finance Expert at uSwitch.com, the independent online comparison and switching service, said that while it was good to see the bank shaking up its rates, this was "a clear a case of giving with one hand and taking back with another" since every positive change is offset by a negative one.
"Overall, customers of first direct should scrutinise any correspondence very carefully between now and October to ensure they do not get stung with a 25 charge. They also need to continue to ensure they are complying with the rules introduced earlier this year to avoid the 10 monthly charge," advised Mr Naylor.
"If customers cannot avoid the new charges, they should consider switching away to a provider that charges lower overdraft rates and no monthly fees, such as Alliance & Leicester's Premier Direct current account which offers an overdraft at a 0% 12 month introductory rate that reverts to 5.9% typical thereafter."
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