Plan Ahead to Keep Down the Cost of Christmas

December 13, 2012

LONDON, UNITED KINGDOM--(Marketwire - Dec 13, 2012) - With the festive season upon us and predictions of a bumper spend on loved ones*, first direct suggests that customers who plan to use their overdraft to cover any additional spending, review their overdraft limit so it will cover their extra seasonal purchases.

Over a third of Brits have used their overdraft in the past 12 months* as it is a very cost effective way to borrow in the short term and this is set to rise as the Christmas cheer gets under way. However shoppers need to understand the cost of their borrowing. Even though first direct current account overdraft interest costs have stayed the same, on average the annual cost of being overdrawn by £500 for 7 days every month has almost doubled in 5 years from £18.94 in 2007 to £40.08 in 2012. This for many would be an unnecessary extra cost to the festive bill.

Andy Forbes, Head of Products at first direct commented, ''An overdraft is a convenient way to borrow for short periods without having to arrange a specific loan. Arranging an adequate limit on your account means you know you have the flexibility to spend up to that amount.

''With our 1st Account there is no cost for setting up or changing your limit so it makes sense to request a limit appropriate to your needs. At first direct there is no interest charged if you keep your overdraft balance under £250 and higher balances are charged at a competitive 15.9% EAR.''

Andrew Hagger from Moneycomms added, ''If you ask people how much it would cost them to use a £500 authorised overdraft facility with their bank, many wouldn''t have a clue. Unfortunately it''s not until interest charges and fees are debited to their accounts that some people realise just how expensive it can be.

''Although daily fees may be seen as more transparent and easier to calculate, it can prove to be a very expensive way of borrowing, particularly for smaller sums. A bit of planning can make an overdraft a sensible way to manage the costs of the festive period.''

    Sept 2007   Annual cost of authorised £500 overdrawn balance for 7 days every month     Nov 2012   Annual cost of authorised £500 overdrawn balance for 7 days every month
Abbey   16.9% EAR   £19.45 Santander - Everyday Current   £1 per day (max £20 per month)   £84.00
Bank of Scotland   18.9% EAR   £21.75 Bank of Scotland - classic   19.94% + £6 pm   £93.80 (first £25 interest free)
Barclays (Bank Account)   15.6% EAR   £17.95 Barclays (Bank Account)   19.3% EAR   £22.21
Clydesdale Bank (Current account plus)   9.6% EAR   £11.05 Clydesdale Bank (Current account plus)   18.85% EAR   £21.69
Co-operative Bank (current)   19.5% EAR + £15 per annum   £37.44 Co-operative Bank (current)   18.9% EAR + £20 per annum   £41.75
First Direct   10.9% EAR   £12.54 First Direct   15.9% EAR   £9.15 (first £250 interest free)
Halifax (Current)   18.9% EAR   £21.75 Halifax (Current)   £1 per day   £84.00
HSBC bank Account   18.8% EAR   £21.63 HSBC bank Account   19.9% EAR   £22.90
Lloyds TSB Classic   19.3% EAR   £22.21 Lloyds TSB Classic   19.94% EAR + £6 pm   £93.80 (first £25 interest free)
Nationwide Flex   7.75% EAR   £8.92 Nationwide Flex   18.9% EAR   £21.75
NatWest - Current Plus   19.9% EAR   £22.90 NatWest - select   19.89% EAR   £22.89
RBS - interest paying current account   19.9% EAR   £22.90 RBS - Select   19.89% AER   £22.89
Smile   11.9% EAR   £13.69 Smile - Current   18.9% EAR   £21.75
Yorkshire bank - Current Account Plus   9.6% EAR   £11.05 Yorkshire bank - Current Account Plus   18.85% EAR   £21.69
Average 14 Accounts       £18.94 per year Average 14 Accounts       £41.73 per year

Research by Andrew Hagger - MoneyComms.co.uk -22 November 2012

*Research by Moneysupermarket

Information about first direct:

  • Winner of Which? Best Financial Provider and Moneywise Most Trusted Financial Provider 3 years running
  • Top financial institution in the Which? Customer Satisfaction Survey with an all-time high of 93%
  • Ranked first in the Retail Banking Satisfaction Study by JD Power & Associates for two years running

first direct provides both telephone banking and online banking services to its 1.2m customers. It offers a full range of personal banking products including its award winning Current Account and offset mortgages.

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