RBS and NatWest customers will be happy to hear that overdraft fees are to be slashed, saving many consumers hundreds of pounds per month.
It is hoped that the move will encourage other banks to follow suit and cut fees.
The taxpayer owns 70% of RBS-NatWest, which has 12.5 million current account holders. The maximum amount that one RBS current account holder could accumulate in fees each month is to be cut from a breathtaking £6,688 to just £260.
These new lower charges – due to come into effect from 1 October, will help ease the pain of going overdrawn without permission or exceeding agreed overdraft limits.
The "unpaid item fee" – imposed as a result of a cheque, standing order or direct debit bouncing – is being lowered from £38 to just £5. The maximum amount customers will be made to pay in unpaid item charges will fall from £114 a day to £50 a month.
The fee imposed for making a purchase when overdrawn, known as the paid referral fee, will be cut from £30 per day to £15 a day.
The fee applied to a customer when guaranteeing a payment using a debit card with the cheque guarantee facility – known as the guaranteed card payment fee, is to be reduced from £35 to £15, and will be capped from £105 a day to £90 a month.
Charges given for customers going overdrawn without permission will be cut from £28 to £20.
The unauthorised overdraft rate on standard current accounts is also going to be reduced from 29.84% to 19.24% EAR.
The cuts made to bank charges comes as the test case on unauthorised overdraft costs – brought forward by the Office of Fair Trading to determine whether these types of charges are fair continues.
The case is being put to the House of Lords, and a verdict is expected within the next few weeks.
Head of RBS's retail division - Brian Hartzer, says: "This is good news for customers. As we look ahead, there are many issues to consider, but we thought it was time to move this particular customer concern forward by cutting our charges. We are changing what we do as a bank and the way we do it."
Some commentators believe that this may be a sign of weakness in the progression of the case, indicating that RBS thinks the banks will lose the case.
Others say the announcement may be linked to recent claims that RBS imposes the highest unauthorised overdraft charges on the high street.
However, Emma North from which4u.co.uk says that this shouldn't be the green light for customers to become careless when managing their current account.
“Always try to avoid unauthorised overdrafts and if you find you are regularly going into the red, it may be time to look for a new account that better suits your financial needs”, she said.
“There are a number of great accounts available, offering high interest rates, 0% overdrafts and even incentives to encourage custom, such as the Alliance & Leicester Premier Current Account, offering £100 to switch, as well as a £2,000 overdraft limit with 0% for 12 months, available to customers aged 21+ that pay in at least £500 on a monthly basis,” she added.
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