Millions of Lloyds Banking Group customers are facing a significant financial squeeze as the high street giant announces a drastic reduction to its interest-free overdraft facility.
From November 6th, 2024, the bank is slashing its buffer zone from £300 to a mere £50 for customers of Lloyds Bank, Halifax, and Bank of Scotland. This move effectively removes a crucial £250 safety net that many have relied upon for short-term cash flow problems.
What the Changes Mean for You
The new policy means customers who dip £51 into their arranged overdraft will immediately start accruing interest at a hefty rate of 39.9% EAR (Equivalent Annual Rate). This is a stark contrast to the previous system where the first £300 was interest-free.
This change will impact a vast number of account holders, particularly those who occasionally use their overdraft as a short-term cushion for unexpected bills or to manage their budget before payday.
Why is Lloyds Making This Change?
While the bank has stated the move is intended to simplify its overdraft structure, financial campaigners have been quick to criticise the decision. They argue it will disproportionately affect those on lower incomes who are already feeling the pressure from the ongoing cost-of-living crisis.
This isn't the first time Lloyds has tightened its overdraft rules. The bank previously scrapped its free £500 buffer for Club Lloyds account holders back in 2022, signalling a broader shift in its approach to consumer lending.
Expert Warnings and Customer Backlash
Money-saving experts have sounded the alarm, labelling the change a 'hammer blow' to loyal customers. The move is seen as a way for the bank to increase revenue from interest charges at a time when many household finances are stretched to their limit.
Customers are being urged to check their banking app or online account for communications from Lloyds and to start budgeting carefully to avoid accidentally slipping into their overdraft and incurring charges come November.
