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40% apr FFS !! Martin Lewis' warning for anyone currently overdrawn


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Martin Lewis issues important warning for anyone that's currently overdrawn

https://www.mirror.co.uk/money/martin-lewis-issues-important-warning-21273806

I posted about this on another thread, a lot of folks are going to get financially murdered ...

40% apr & £6 a month fee for those constantly in their o/d

another potential black swan ?

Good stories about it on radio 4. 

relisten https://www.bbc.co.uk/programmes/m000d70s

Quote

Call You and Yours: Have you lived on credit?

You and YoursOn Call You and Yours today, we're talking about debt. Financial helplines get a lot of calls in January - it's the time when people feel the effects of Christmas spending. If you do not have enough money coming in to make ends meet or to cover unexpected bills, juggling debt can become a way of life.

A lot is changing when it comes to overdrafts and credit cards this year. From April, charges for arranged overdrafts will go up sharply. The changes will hit people who often have an overdraft and don't pay their credit card bills in full.  

https://www.bbc.co.uk/programmes/m000d70s

 

Edited by Saving For a Space Ship
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Looks like the Banks are in party season just been notified that my Santander Current acc that pays  1.5 % on 20 k is to be reduced to 1% ,overdrafts are  to be 39% from May also cash backs on standing orders will be a max of £5, dark days ahead unless your in top management at the Banks.

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I think when the fca said 'all overdrafts should be charged at the same rate' they quietly hoped the banks might exercise some self control and not jack all their overdraft rates to 40%.

As I said on the other thread the increase in overdraft rates, coupled with forcing persistent debtors (3 mn of them) to repay their credit cards within 3 years will hit a cohort of debtors very hard. I've read about mandatory repayment plans forcing people to pay out more than half their take home pay to clear the debt.  

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11 hours ago, papag said:

Looks like the Banks are in party season just been notified that my Santander Current acc that pays  1.5 % on 20 k is to be reduced to 1% ,overdrafts are  to be 39% from May also cash backs on standing orders will be a max of £5, dark days ahead unless your in top management at the Banks.

That was 3% in 2016, before dropping to 1.5% a year or so later. Couple that with all the Santander branches near me closing bar one in town, and I think it time to switch away from them. But where to?

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7 hours ago, jiltedjen said:

what has caused this? whats the plan? expecting interest rates to go up or something?

I'm with you ... What's the bigger picture here as it doesn't make sense?  Most of my friends back home live in their overdraft to pay off credit cards!  I'd guess to get out of that cycle will take at least a year!

It's clearly targeting something, but I can't work it out.  If it kills the OPM (other peoples money) mantra then great, but the collateral damage is too high imho. 

Maybe forcing people stuck in this cycle with no assets to speak of to go the IVA route and wipe everything clean?  I can't work it out.

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surely they want people to load up on debt? I don’t understand why they are doing this?

for some it will be like £1,000 in debt for others huge amounts

do they want people to consolidate into other debt at better interest rates (so individuals can ultimately borrow more)

is the logic that those having to take out loans to cover £5k of debt, might ask for a £10k loan as you ‘might as well’

just seems out of the blue, and in effect a tightening of credit

whats the play here?

maybe there are looking at debt levels shooting up crazy amounts over Christmas to the point the system won’t cope and it’s a massive risk, more of a need to act than a want to act? 

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14 hours ago, dpg50000 said:

That was 3% in 2016, before dropping to 1.5% a year or so later. Couple that with all the Santander branches near me closing bar one in town, and I think it time to switch away from them. But where to?

You can still get 2% on Club Lloyds (4k + to a max of 5k) plus a 2.5% Club Reg saver and a 2% reg saver

Bank of Scotland, exactly the same but you can have 2 Vantage account with them (but only one 2% reg saver)

 

Combine them to get 2% on 15k.

EDIT: You will need 2 DDs per account and shunt in 1500 a month but you can cycle the min pay in between accounts.

EDIT: Nationwide have a decent 5% (for a year) account if you havent had one before, it drops to 1% after 12 months though.

I will be ditching Santander come May

 

Edited by Chunketh
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18 hours ago, jiltedjen said:

what has caused this? whats the plan? expecting interest rates to go up or something?

QE has prevented banks from getting their normal earnings with normal spread between base rates and lending.

SO they are are looking ta every wrinkle and scam.

Laughably, QE has given poor people Argentinian levels of borrowing.

You can chalk that up as another genus idea from central bankers.

 

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https://www.moneyadviceservice.org.uk/blog/what-the-changes-to-overdraft-fees-mean-for-you

"Interest on all overdrafts will be charged at a single annual interest rate (APR).

No daily or monthly fees for using your overdraft.

The same interest rate for arranged and unarranged overdrafts."

So it looks like the banks are ramping up the interest rate to make up for the money lost on daily and monthly fees.

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1 hour ago, PaulParanoia said:

https://www.moneyadviceservice.org.uk/blog/what-the-changes-to-overdraft-fees-mean-for-you

"Interest on all overdrafts will be charged at a single annual interest rate (APR).

No daily or monthly fees for using your overdraft.

The same interest rate for arranged and unarranged overdrafts."

So it looks like the banks are ramping up the interest rate to make up for the money lost on daily and monthly fees.

That's how I read it.

Hopefully the plebs will pay it off. No profit for the banksters Anymore from casual debts.

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As someone who is very careful and responsible with money, I prefer the banks take this route rather than collaborate to bring in account fees for everyone. Many people in this country have become too insensitive and blasé about carrying large amounts of debt.

Edited by rantnrave
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(Glass half-full here) I think this is a good thing.....eventually.  It is going to be very painful though for many unfortunately.

Addressing the issue of people who consistently live way beyond their means; and give the banks a lot of money as a result is (probably) a good thing.  "Persistent Debt" being the phrase.

https://www.bankrate.com/uk/credit-cards/credit-card-rules-for-persistent-debt/

Btw this doesn't negate that many people are going to be dropped right in it, and if had been managed properly in the first place.......

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24 minutes ago, longgone said:

so when will they be applying the same logic to mortgage payments  40% is probably about right. 

Lol no it's not

Long-term secured debt is a totally different animal to short-term unsecured debt

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1 minute ago, scottbeard said:

Lol no it's not

Long-term secured debt is a totally different animal to short-term unsecured debt

It needs to be the same animal but then i am biased it could be 1000% and have no affect to me. ;)

it`s time for the farmer to bring them chicken home to roost. 50% mortgage Apr yayyy

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1 hour ago, rantnrave said:

As someone who is very careful and responsible with money, I prefer the banks take this route rather than collaborate to bring in account fees for everyone. Many people in this country have become too insensitive and blasé about carrying large amounts of debt.

Indeed.

Its better for banks to be upfront with their scams rather than having another PPI.

 

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9 hours ago, rantnrave said:

As someone who is very careful and responsible with money, I prefer the banks take this route rather than collaborate to bring in account fees for everyone. Many people in this country have become too insensitive and blasé about carrying large amounts of debt.

And that will have been seriously considered. 

Basically high APRs is money for old rope...the agenda is shareholder value and those yummy bonuses. Customers come third....if they are lucky. 

Best thing anyone can do is vote with their feet by moving provider or changing how they use credit. Many won’t...so best keep expecting this. 

Those pay day lender have done superb APRs....and banks know that helps their cause. 

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On 14/01/2020 at 20:05, regprentice said:

I think when the fca said 'all overdrafts should be charged at the same rate' they quietly hoped the banks might exercise some self control and not jack all their overdraft rates to 40%.

 

Bit Annoyed it has not created competition, the Banks must have colluded as they are all going to 39.9% APR.  Especially upset as the APR on our Joint First Direct account is rising from 15.9% to 39.9%.  Mainly because with FD their was no fixed fee penalty for using our £1500 arranged overdraft, just the 15.9% calculated daily. As i'm paid on the 28th and my spouse on the 15th we often dip into the overdraft paying bills, etc. Last month we paid 19p in interest. 

So this will rise to say, I don't know, £1 a month the way we use our overdraft.  

On the other end of the existing scale I have a Natwest account with an overdraft for my "Beer Money". Occasionally I have mucked up and gone overdrawn by maybe £10 for a few days. And I get a bloody £7.50 charge plus a few pence interest for using the overdraft.

So this new system even at 39.9% will be way better for me, maybe every few times I year I dip into my overdraft I will pay the 39.9% for a small amount for a few days and pay maybe £1-2 in that month.  Far better than a flippin £7.50 charge. 

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Better for those just dipping in and out of overdraft for a short period of time......anyone permanently living in an overdraft will pay the most......convert it into a loan, cut all but one credit card up, use it and pay in full each month and don't go overdrawn except for a short term......very rarely or even better never........open a saving account and save any money monthly that used to pay in bank charges and interest......soon adds up.?

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57 minutes ago, markyh said:

.So this new system even at 39.9% will be way better for me, maybe every few times I year I dip into my overdraft I will pay the 39.9% for a small amount for a few days and pay maybe £1-2 in that month.  Far better than a flippin £7.50 charge. 

Yes for occasional users it's better. Stepchange reckon the average overdraft of people in debt is £1.7k.

Plenty of ways to find yourself there. You might roll off of an interest free student overdraft, or get given an overdraft as part of a debt restructure with your bank, or if you couldn't get a 'decent' credit card then an overdraft might have been a lower interest option before these changes. 

If you phone your bank and ask for help with a shirt term 'blip' in your finances you are likely to find yourself with an overdraft. Example on the radio last week was a student whose flatmate disappeared leaving him with 'whole' utility bills to pay and another few months rent to pay. Pushed him In to debt he ended up with a 2 or 3k overdraft where he couldn't keep on top of the repayments. 

Edited by regprentice
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honestly come april its going to be carnage. Will be a big backlash.

part of me is sat smirking, but for massive parts of my live the overdraft has been pretty vital (student years and a few years afterwards), if this had happened to me back then it would of been brutal

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  • 419 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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