Barclays to spark cutting of 'unfair' bank charges

15 August 2008 / by Rachael Stiles
Traditional bank charges will become a thing of the past for customers of Barclays Bank on Monday when it changes the way that it penalises people for using unauthorised overdrafts.

Barclays Bank says that its new system – whereby the customer has a 'Personal Reserve' – will "significantly reduce" overdraft charges for the majority of its customers.

As announced previously, Barclays – one of the UK's biggest banks – will be implementing its new Personal Reserve scheme next week, which will effectively do away with unauthorised overdrafts for its current account customers.

Barclays' customers will each have a Personal Reserve for when they exceed their overdraft, expected to be around £250, which they will be able to use without prior agreement for a one-off charge of £22.

They will then be able to make unlimited withdrawals and payments for five days, within their reserve limit, without incurring further charges.

There will be an additional charge of £8 each time someone exceeds their Personal Reserve, and further cheques and payments will be refused. But, without being charged interest, customers will not see their debt continue to rise if they do not keep spending outside of their 'Personal Reserve' limit.

One of the main arguments against supposedly unfair bank charges has been that customers are hit with a charge and before they can repay it, interest and charges accrue each day, pushing the debt up further and making it increasingly difficult to repay.

Barclays has launched a new website to explain how the Personal Reserve will work, so that its customers can see how it will affect them. All eligible customers will have already been informed about the new process, and their own personal limit, and their accounts will automatically adopt it unless they opt out.

According to Barclays, 90 per cent of its customers have opted to keep the service on their account. "We know from our research that customers appreciate the certainty, simplicity and transparency that Personal Reserve will bring." said Andy Harris, head of current accounts for Barclays.

The charges are expected to be a vast improvement on the £35 a go that Barclays has charging for unauthorised overdrafts, and consumer action groups hope that this move will encourage a price war among the biggest banks which will benefit customers.

Andrew Hagger at, a financial website, said: "Five days should be sufficient for the majority of people to return their account to order or contact the bank to discuss the possibility of a temporary overdraft increase. The deal is fairer and a big improvement on the previous charging structure."

The bank charges controversy has seen thousands of people claiming back thousands of pounds of what the Office of Fair Trading deemed disproportionate charges. There is currently a freeze on reclaiming while the matter is battled out in court – the banks are currently appealing a high court decision – but unsatisfied customers can still submit a form to reclaim bank charges in anticipation of a victory for the consumer.

© Fair Investment Company Ltd