Beat the Halifax overdraft rip-off!

by Ed Bowsher on 22 October 2009  |  1 comment
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Halifax’s new structure for overdraft fees will hit some customers very hard. Find out how Halifax customers could save as much as £465 a year.

Halifax is introducing a pricey new fee structure for its overdrafts. Customers are receiving letters outlining the new terms and they're not happy. I'm not surprised. But the good news is this: there are better alternatives. 

Here's how Halifax's scheme works: customers will no longer pay interest on their overdrafts, instead they'll pay a daily fee. If you have an arranged overdraft of up to £2500, you'll pay £1 a day. If the overdraft is over £2500, you'll pay £2 a day.                      

So if your overdraft stays at £2500, you'll pay £365 a year, which is equivalent to 14.6%. That's not great, but not horrendously bad either. But if your overdraft is smaller, your effective interest rate is far higher. If you're only in the red by £100, you still pay £365 - a whopping 365% annual interest rate! 

If I were a Halifax customer, I wouldn't stand for this. There are other ways you can borrow more cheaply. You could switch to the Alliance & Leicester Premier Current Account which has a 0% overdraft rate and there are no usage fees for the first year.* On top of that, you'll receive a £100 cashback bonus when you sign up. Switching from Halifax to Alliance & Leicester could make you £465 richer. 

Another option would be to get a Virgin Credit Card. Once you've got the card, you can do a money transfer from the card to your current account, and clear your overdraft. You'll then have debt on your Virgin card, but you won't have to pay any interest on that debt for 16 months. (Although you will have to pay a 4% fee.) That's a better option than paying £1 a day. 

So don't let Halifax beat you down. Fight back! 

* After the first year, the usage fee rises to 50p a day, with a limit of £5 a month.

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