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The UK's ninth-largest bank, Alliance & Leicester, is replacing interest charges on overdrafts with a daily fee for customers who go overdrawn. The move is part of an overhaul of its fee structure as it seeks to maintain its growing share of the valuable UK current account market. Douglas Blakey reports
Alliance & Leicester (A&L), the UK's ninth-largest bank by assets, is to stop charging its current account customers interest on their overdrawn balances, an innovation which the bank claims is a first in UK retail banking. Instead, A&L will charge customers who make use of an agreed overdraft facility a daily fee of pound 0.50 ($1) up to a maximum of pound 5 per month, provided the agreed overdraft limit is not exceeded.
Up to now, A&L customers using an authorised overdraft have paid interest of between 6 percent and 17 percent per year.
Customers who exceed their overdraft limit or who have an unauthorised overdraft will pay increased fees of pound 5 per day with no monthly cap set, meaning that customers who exceed their limit for one month would have to pay up to pound 155. Currently, A&L charges unauthorised borrowers a fee of pound 25 on day one and another pound 25 five days later if the customer continues to exceed the overdraft limit.
"Alliance & Leicester is the first UK bank to abolish overdraft interest for all its customers. The changes we are making mean that customers using their agreed overdraft will never pay more...