Barclays has become the first bank to take pre-emptive action against a possible ruling over bank charges by overhauling overdrafts on their new range of current accounts.
In a move that is expected to encourage fierce competition of current accounts
from other banks, Barclays – one of the UK's biggest banks – will be offering a "fundamentally new approach" to overdrawn accounts that will replace the traditional charging system and could save customers money.
Instead of the current system of charging a customer for exceeding their overdraft and charging them again for consecutive transactions, most customers will also be allowed the option of a 'personal reserve' of between £150 and £1,500, in addition to their authorised overdraft.
Charges will be replaced with a flat fee of £22, but for the following five days the customer will be allowed to make unlimited transactions within their reserve without incurring penalties and without the payments bouncing back.
This will prevent the common occurrence of customers building up charges upon charges that led many people to paying thousands of pounds in overdraft charges because they could not afford to repay them.
As part of the revamp, Barclays will also offer two new packaged current accounts
, which will replace the unauthorised overdraft fee with a charge of £8 per transaction.
"We have listened to our customers and acted on this feedback by completely revamping our unauthorised overdraft service, replacing it with the new Personal Reserve." comments Mark Parsons, managing director of current accounts at Barclays. "Our customers wanted a simple, clear way of managing payments when they go beyond agreed limits."
Mr Parsons added: "The overall package of changes we are making for new and existing customers provides a simple, clear choice and improved value, marking a step change in current account banking in the UK.".
Andrew Hagger of Moneynet.co.uk said of the revised Barclays current account range that "With bank charges
still very much on the agenda as the OFT court case rumbles on, Barclays has announced some radical changes to its current account range."
"It is definitely a move in the right direction" he said. "This is a vast improvement on some other high street accounts where you are subject to an unauthorised fee of up to £28 plus additional interest and/or charges of up to £20 per day."
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