Lloyds, Halifax and Bank of Scotland have announced plans to increase overdraft fees to as much as 49.9% this year in line with new interest rate guidelines.
Lloyds Banking Group, which encompasses the three lenders, said it will scrap daily fees for arranged overdrafts from April 6, and instead charge a rate based on customers' credit history, with the majority set to pay 39.9% but some as high as 49.9%.
Under current rules, customers pay a varying rate based on their overdraft size and how long they're in it.
This is typically 1p for every full £6 you borrow up to £1,250, 1p for every further full £7 you borrow between £1,250 and £2,500 and then a further 1p for every full £8 you borrow over £2,500.
However, from the beginning of April, daily fees will be scrapped and interest charged instead.
The banking giant claims 90% of its customers with an overdraft will pay less under the changes, which will involve a flat interest rate of either 39.9% or 49.9% EAR on all overdraft borrowing.
Which rate you're charged will depend on your credit history and "how you operate your account" - but overall, it claims most customers will get the lower rate.
But in good news, arranged overdrafts on student and graduate accounts will remain fee-free.
Meanwhile, fee-free buffers are dropping to £50 on some accounts, including the Halifax Ultimate Reward and Lloyds Gold.
On the Lloyds and Bank of Scotland Premier accounts, the buffer will drop from £500 to £250.
Lloyds said just a minority of customers will pay more under the changes, with the average monthly increase £1.89. It claims that no one will pay more than £10 a month.
A Lloyds Banking Group spokesman said: "We are writing to our customers to explain the new overdraft rates that will apply from April 2020. As a result of these changes, 90% of customers with an overdraft will pay less than they do today. The majority of customers will pay the APR of 39.9% on most of our current accounts, 27.5% on our Club Lloyds account.
"Customers will be offered a personalised overdraft rate, up to 49.9%, depending on their circumstances. We have not charged unarranged overdraft fees or returned item fees since 2017, and this will not change - we know this simple approach is valued by our customers."
