HSBC plans to double overdraft charges to 40%

HSBC will impose a single overdraft rate of 39.9% on customers from March 2020 Credit: PA

HSBC plans to introduce charges of 39.9% on overdrafts, prompting fears high fees for going into the red could become the "new normal".

The new charges will take effect from March 14, 2020, following in the footsteps of Nationwide Building Society.

The new fees are a steep rise from the maximum 19.9% charged to some of the bank's overdraft customers.

What is the bank planning to change?

Industry observers have expressed concern about the new charges. Credit: PA

An overhaul of HSBC's charging policy will also remove a £5 daily fee for going into an unarranged overdraft and introduce an interest-free £25 buffer on Bank Account and Advance accounts, providing leeway for those going slightly overdrawn.

The bank has said seven in ten customers will be better off under the new scheme, but declined to go into further detail.

HSBC's new charging structure follows the Financial Conduct Authority unveiling plans to clamp down on complex overdraft charging structures, with new legislation meaning providers must show costs with a simple annual rate to shake up the "dysfunctional" overdraft market.

Customers will be charged up to 40% for going into an unplanned overdraft. Credit: PA

Market observers previously speculated banks may hike their authorised overdraft fees after regulation changes, with Rachel Springall of Moneyfacts.co.uk calling the changes "disapponting".

She said: "It’s disappointing to see such a hike in overdraft charges but there may be more brands coming out in the coming weeks to announce changes too."

Helen Saxon, banking editor at MoneySavingExpert.com, said: “With both of the first banks to announce changes moving overdraft interest rates to around 40%, we have to wonder if this is the new normal.”