From mortgage holidays through to disappearing deals, here’s what you need to know about how your bank is working during the crisis.
Like everything right now, our banks aren’t able to offer a normal service – and it’s at a time when we’ve all got lots of questions. But many are also adding new policies and processes to help those struggling.
So here’s a round-up of some of the things that have changed, and some of the things that have stayed the same.
Obviously, it’s best to check the website for your own bank, and I’ve included links to each of the main banks’ policies at the bottom of this article.
Your borrowing
Update 9th April 2020
The FCA has told banks to extend interest-free overdrafts and freeze other debts for “consumers negatively impacted by coronavirus”.
This means all banks will offer a £500 interest-free overdraft, but you will need to ask for this in most cases if you don’t already have an arranged overdraft.
You can also now ask for a three month payment holiday on your credit cards and most regulated loans as well as mortgages.
These new policies might not be up and running until Tuesday 14th April.
New overdraft buffers
The new overdraft charges that have been coming for a while now are still going to go ahead in most cases. However, most banks have relaxed charges or introduced interest-free buffers to help people over the next few months.
Here’s what the main banks are doing:
- Barclays – no interest charged between 27th March and 30th April 2020
- First Direct – no change to existing £250 interest-free overdraft
- Halifax – £300 interest-free overdraft from 6th April until 6th July 2020
- HSBC – £300 interest-free overdraft until further notice
- Lloyds – £300 interest-free overdraft from 6th April until 6th July 2020
- M&S Bank – no change to existing £250 interest-free overdraft
- Nationwide – you can request an interest holiday if your finances are affected by Covid-19
- NatWest – interest rates staying at 19.89% rather than increase to 39.49%
- RBS – interest rates staying at 19.89% rather than increase to 39.49%
- Santander – £350 interest-free overdraft from 6th April until 6th July 2020
Don’t forget, any money in these buffers once the restrictions are lifted will begin to be hit with rates of up to 40%. You can read more about what your overdraft is really costing you here.
You must agree any changes
Though the above-mentioned changes to overdrafts are mostly automatic, that’s not the case if you need to stop payments for loans, credit cards and overdrafts.
If you just cancel these payments you’ll likely face penalty fees and see your credit report take a hit.
Instead you need to get in touch with your bank to agree whether you can take a break.
Credit cards and loan help available
Some banks are saying that there will be no fees for missing payments, while others will let you agree a breathing space break. Talk to your card or loan provider to see what they can do.
Mortgages holidays for most
If you have a mortgage then you can ask your lender to give you a holiday for three months. Most of the time you can make this application online.
If you choose to take the holiday you’ll still have to make the payments, and this could be added to the total cost and then spread out across your other payments – which means they’ll all increase a bit when the holiday is over.
Alternatively, they might just increase the length of your mortgage to reflect the extra three months.
With both options, which will probably be decided by the bank, you’ll still be charged interest on your mortgage debt.
New deals getting pulled
It’s been reported that lenders are tightening their criteria, meaning it could be harder to get new cards and loans, so if you think you’ll need to get hold of one then it’s worth doing it sooner rather than later. For example, a 0% purchase credit card could be back-up in your wallet for emergencies.
Here’s how 0% Balance Transfer cards work, and here’s how 0% Money Transfer cards work.
If you’re thinking of remortgaging due to the cut in rates, you might also find it harder to get a decent deal. Some lenders, such as Halifax and Barclays, have removed all new deals for anyone with an LTV (Loan to Value) of less than 60%. This means you’ll need to have at least 40% of the value of the property paid off.
If you need more help
Though these measures will help you weather this storm, it might not be enough to deal with large debts that could get bigger.
If you are worried about what to do, then you should talk to a free debt charity such as StepChange. Here’s more about how you should deal with problem debts.
Your banking
Customer support struggling
As I predicted a few weeks ago a mix of less staff in call centres and increased demand means getting through to banks on the phone is requiring waits of hours and hours. Many branches have also closed or reduced opening hours.
If your enquiry isn’t urgent then it’s worth just waiting, or seeing if there are alternative ways to get the help you need. For example, most applications can be done online, and there’s often a help section on the bank’s websites which might give the guidance you need.
As I mentioned a few weeks ago in my guide to your money during social distancing, it really is worth setting up internet banking if you haven’t already (though this could take longer than normal).
Opening new current accounts
First Direct has stopped accepting new customers for the moment, and this could be something other banks look to do while they cope with demand elsewhere.
So if you do need to open a new account for whatever reason I wouldn’t leave it too long – especially since it could take longer for you to get all the documents you need.
Bank switching offers dropped
HSBC, Natwest and RBS all removed their £175 switching bonuses earlier than planned, meaning the only cash bonus available right now for switching is at Nationwide – but only if you have a friend who can refer you.
Of course that doesn’t mean you shouldn’t make sure you’ve got the best bank for you. The Santander 123 Lite account still offers up to 3% cashback on bills, while the Nationwide FlexDirect gives 5% in interest for a year, worth £125.
Here’s my full list of the different incentives and deals on offer from the banks.
Are you paying for features you can’t use?
For a monthly fee there are a number of packaged bank accounts which will give you freebies such as travel insurance and breakdown cover. These accounts can cost anywhere from £13 to around £20, depending on the features and the bank.
Since you won’t be able to use most of the included features I’d consider cancelling these and downgrade to standard free accounts for the time being. Once the social distancing restrictions are lifted you can always move back to it.
However, only do this if you don’t still need the benefits. For example, if you’ve got a holiday booked for later this year that hasn’t been cancelled you don’t want to lose the cover in the meantime.
Plus if you do go back it’s likely the included travel insurance won’t cover future outbreaks of coronavirus – so bear that in mind.
Your savings
Emergency access to fixed savings
Most fixed-term savings accounts don’t let you make early withdrawals, but during the crisis you might actually be able to do this without paying any penalties.
Your money is safe up to £85,000
If a bank was to go under during this crisis your money is likely going to be safe thanks to the Financial Services Compensation Scheme (FSCS).
This guarantees money of up to £85,000 so as long as you don’t have more than this you’ll get your money back. It extends to £1 million for six months if you’ve got extra due to things like selling a house or inheritance.
The protection is per UK-regulated institution, which means you can spread your money across different financial institutions. Watch out though as some such as Halifax and Bank of Scotland count as one.
This tool from Money Saving Expert lets you check which banks are combined.
Rate cuts are on the cards
Though we’ve seen two huge cuts to the base rate in the last few weeks, quite a few fixed-rate savings rates haven’t dropped yet.
So if you want to lock in your money now in case they do fall even lower then you don’t want to delay. Here’s more on your options.