Barclays replace overdrafts with 'Personal Reserves'

02 June 2008 15:41:03

Barclays has announced it will be scrapping unauthorised overdrafts on its current accounts in favour of a ‘safety net’ that will cost the account holder £22 for each five day period that it is used, the Guardian has reported.

Barclays’ customers who currently hold authorised overdrafts will be offered an additional ‘Personal Reserve’. When in use the bank will not charge additional interest or transaction fees.

Over the course of the next two months Barclays will be writing to all its account holders to inform them of the changes and advise them of their Personal Reserve limit before it launches them on 18 August.

The bank has said the typical ‘Personal Reserve’ will be £250 but the amount each individual account holder is entitled to will depend on their credit rating; customers will poor credit ratings will be entitled to less.

Customers will be given the option of ‘opting out’ of the facility and the bank will only charge customers for the reserve if they actually use it.

Which?, the consumer watchdog, has welcomed the move.

“We welcome the reduction in unauthorised overdraft charges and a simplification for customers,” said Peter Vicary-Smith, Which? chief executive.

“We’ve long said that people want simple and transparent banking and Barclays is going in the right direction.”

When the personal reserve limit is breached, the account holder will be charged £8 for each and every unauthorised transaction or bounced cheque.

Meanwhile, other elements of Barclays’ current accounts will be changed. As of today, 2 June, the credit interest will drop from 0.1 per cent to zero per cent and its authorised overdraft interest rate will increase by 2.3 per cent to 17.9 per cent.

Account holders who wish to earn interest on funds in their current account will need to choose the bank’s new current account plus which offers 3 per cent interest and costs £3 per month.

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