Global bank HSBC is setting a single annual overdraft rate of 39.9% for its U.K. customers, as it scraps daily charges for people who go into unarranged borrowing on their account.
The new interest rate on both arranged and unarranged overdrafts comes into place on March 14, 2020, and will be charged on the amount borrowed.
HSBC currently charges between 9.9% and 19.9% of interest on arranged overdrafts.
The bank is removing the £5 ($6.57) daily usage fee for unarranged overdrafts and reducing the monthly maximum cost for using an unarranged overdraft to £20 from £80.
HSBC is also introducing a £25 buffer on the amount people can borrow interest free, where they won’t be charged on their arranged overdraft below this limit. This applies to HSBC Advance, Bank Account and Current Account.
This buffer goes up to £500 for its Premier account customers and £1,000 for its Jade account customers.
HSBC said the changes mean using an overdraft will be cheaper or cost the same for seven out of 10 of its U.K. customers.