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UK's Monzo Bank changes overdraft rates in anticipation of new FCA rules

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UK's Monzo Bank changes overdraft rates in anticipation of new FCA rules

U.K. digital bank Monzo Bank Ltd. changed its overdraft fees from a fixed 50 pence per day to an equivalent annual rate of 19%, 29% or 39%, based on the borrower's credit score.

"We think 87% of people will be better off or see a monthly change of less than £1," Monzo said.

The digital bank also said that it would stop offering the free £20 buffer but added that the charge for being overdrawn by £20 for a month would only be around 57 pence at most. It added that it is also raising the overdraft limit for some customers to £3,000 due to demand.

The new system will be applicable to all customers from April 1, 2020, and Monzo will also provide the option of switching over in December or January 2020.

The change was made to comply with the U.K. Financial Conduct Authority's new rules to fix the "dysfunctional" overdraft market that will come into effect April 6, 2020.