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New Overdraft rates...Lloyds you sneaky f#ckers!
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New Overdraft rates...Lloyds you sneaky f#ckers! 10 months, 3 weeks ago #12035

  • DanH
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Nothing to do with Motorcycles, I know...but I just had to share this.

Anyone who uses an overdraft facility should know about this, borrowing is about to get a whole lot more expensive

Our farm business received an update through the post from Lloyds about changes due to take place in November for Overdraft charges and I nearly spat my coffee out while reading it I couldn't believe what I was reading so after a bit of checking online I found this from someone who has done a fine job of explaining the situation...

Here is how larrylamb11 from the VW forum breaks it down..

As is the way with banks, a never ending stream of putrid bank related bile or 'communication' finds it's way to LL11 towers, where it generally gets binned.... the same way as it does in households throughout the land.

Most recent to plop onto the the mat was a missive from Lloyds bank explaining how overdraft fees are changing. All very dry and boring and headed straight for the bin, BUT for the fact that it seemed to me to be peddling simplicity and great value. Knowing banks the way I do, this makes me suspicious ...

So I actually read what they have written. Overdrafts simplified, no usage fees, no returned fees, no unplanned fees, just 1p a day for every £7 you are overdrawn. Sounds like a massive WIN right?

WRONG.

Like every good Trojan horse, Lloyds are cleverly concealing the attack here. I looked everywhere in the paperwork for the EAR (Equivalent Annual Rate - how much it actually costs in % over a year for overdraft borrowing) to be able to make a like-for-like comparison with the current overdraft rate, but it is nowhere to be found......

So I calculated it. Like this:-

Assume you have a £1000 overdraft for one year.
For every day overdrawn Lloyds will charge you £1000/£7 * 1p (1p for every £7 overdrawn, as above)
They round that down to the nearest whole penny, so £1.42p interest for day 1.
Overdraft balance at the end of Day 1: £1001.42
On Day 2 they levy their 1p / £7 on the whole balance again, so another £1.43p
Overdraft balance at the end of Day 2: £1002.85
and so on...
and so on...
..

..

this is compound interest in action kids, pay attention

..

..
and so on
until day 365, by which time your overdraft balance has grown to: £1679.04

That's right, by adding 1p/£7 every day you rack up £679.04 in interest in just ONE YEAR. Thus the Equivalent Annual Interest rate is a MASSIVE 67.9% interest. This compares with their current EAR of 19.89% variable + monthly usage charge which would equate to £270.90 in fees & interest over one year.

Make no mistake, even by bank standards this is an impressive piece of shafting, so heads up - don't fall foul of complacency or be mugged off. If you have an overdraft with Lloyds of more than £150, you will shortly be substantially worse off and I would strongly urge you to take steps now to avoid being raped!
Take the Byway not the Highway
Last Edit: 10 months, 3 weeks ago by DanH.

Re: New Overdraft rates...Lloyds you sneaky f#ckers! 10 months, 3 weeks ago #12036

  • Ben600
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Very interesting, thanks for sharing Dan.

Santander I believe are moving to a similar thing too
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New Overdraft rates...Lloyds you sneaky f#ckers! 10 months, 1 week ago #12037

  • ferdie
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Wow hope NatWest don't follow

Sent from my Moto G (4) using Tapatalk
Sometimes you're flush and sometimes you're bust, and when you're up, it's never as good as it seems, and when you're down, you never think you're gonna be up again. But life goes on.

Re: New Overdraft rates...Lloyds you sneaky f#ckers! 10 months ago #12040

  • steveR
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Very interesting piece Dan, thank you.... I think!

It looks as if their new business model is taken straight from the shyster payday loan outfits as seen a on a TV near you.

Happily, I am able to run without a formal overdraft, but if this oh so generous offer was made to me, I would be heading to the High St for another bank PDQ...
Steve
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