24 September 2007
Changes to Alliance & Leicester (A&L) current account range could be good news for UK consumers; however uSwitch warns the changes could have a "sting in their tail".
Last week Alliance & Leicester announced it was to stop charging interest on going into the red for its current account customers in a bid to simplify its overdraft charges following the recent bank fees debate.
Authorised overdraft fees will now be charged from 50 pence per day, capped at a maximum of £5 per month, the bank says - while unauthorised overdraft customers will now be charged £5 per day from October 22nd.
While Mike Naylor, personal finance expert at uSwitch.com described the changes as "broadly positive" he claimed that for Alliance & Leicester customers who exceed their authorised overdraft limit or go overdrawn without an overdraft could be "left out of pocket".
"Alliance & Leicester's decision to offer a "0%" authorised and unauthorised overdraft is too good to be true. Under the new charging structure, authorised overdraft usage could cost customers up to £5 a month, or £60 a year," he said.
"This is equivalent to an overdraft interest rate of 6.15% EAR, which for Premier Direct customers is actually slightly higher than the previous rate of 5.9% EAR after the 12 month 0% offer is over - so they could end up being out of pocket.
"Similarly, whilst dropping the maximum charge from £50 a month, to £5 a day on unauthorised borrowing is a positive move for some, customers who slip into unauthorised overdrafts regularly will need to keep a close eye on how much it is costing them.
"£5 a day may seem a better deal, but fees are not capped, meaning a customer could face a monthly charge of up to £155 if they were to go over their authorised overdraft limit every day," he added.
According to research by Alliance & Leicester 81% of their customers stated that they would accept overdraft fees if they could continue to bank for free.
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