James Daley

By James Daley

Santander's new overdraft charges will finally come into force tomorrow - giving some of its borrowers a slightly easier time if they stray over their overdraft limit. Most notably, customers of its everyday current account will now pay £10 if a payment takes them over their overdraft limit (plus a £6 a day unauthorised overdraft usage fee), instead of the £25 that they are currently being hit with. And customers of the popular 123 account won't pay anything at all (they currently pay £10).

The changes come into force just a couple of days after HSBC announced that it too would be cutting its bank charges later this year. In HSBC's case, its £25 for busting your limit will be replaced with a £5 a day fee - and more importantly, it's cap on charges for the month will be lowered to £80.

Come on the Co-op

Santander and HSBC are the last of the big banks to lower their fees for people who bust their limit - and there are now just a handful of outliers left charging too much to those who can least afford it. The most surprising of these is the Co-op, which charges £20 for busting your limit, followed by a further £20 each time a payment comes out and you borrow more. It caps charges at £150, but only over a quarter. Most people would hit the cap within a couple of weeks.

In the OFT's overdraft charges scenario, the Co-op is now one of just three banking groups to have a cap of more than £100. Yorkshire & Clydesdale Banks still remain the worst - with no cap in place at all. While Santander, in spite of its improvements tomorrow, will still only cap its 123 customers at £90, with the rest being on the hook for up to £150 a month in charges.

While we might expect it from Yorkshire and Santander - who are not exactly known for leading the way in the consumer-friendly stakes - it's disappointing to see the Co-op lingering so far behind the pack. Barclays now caps its unauthorised overdraft charges at just £35 a month. So even over three months, it's much cheaper than the Co-op's £150 a quarter cap.

I've redrafted the table showing how banks stack up on the OFT's six overdraft charging scenarios. Let's hope Clydesdale/Yorkshire and the Co-op are working on something as I write.