Lloyds ends ‘fee free’ offer and raises overdraft rates on its paid-for accounts
Many Lloyds TSB banking customers, who have had the usual £17-a-month fee waived on their Platinum account for years, will have to pay from October if they want to continue to keep the free travel insurance and other benefits.
As part of an overhaul, which will also substantially raise the cost of going overdrawn for those holding a paid-for account, Lloyds revealed that a “small” number of those packaged account holders, who have enjoyed the “fee waiver”, will have to pay from 2 October.
Many long-standing Lloyds customers, who agreed to keep a certain balance in their current account – typically £4,000 or more – were offered the “free” upgrade to Platinum, which offers free travel and mobile insurance, AA cover, plus several other benefits such as fraud protection policies and reduced overdraft charges. The regular charge for this account is £204 a year.
Money reader Gordon Watson, who lives near Royston in Hertfordshire, contacted us this week to say he and his wife had been told they would have to pay from October. Although it turned out that their account will remain free, it has emerged that other customers have not fared as well. A Lloyds spokesman confirmed that a “small number of customers” have had the “fee waiver” removed. However, he declined to shed any light on how this group would be selected.
One conclusion is that it will be customers who don’t buy enough other products, or keep sufficiently high balances in their account, though this has been denied by the bank.
“We are writing to all those affected,” says the spokesman. “Just 0.1% of our current account holders received these fee waivers. Unfortunately, the cost of providing these benefits has risen, so we have had to look at the area and make these changes.”
He said no new customer has been given this option since 2005.
Perhaps of greater interest to the majority of Lloyds’ customers will be the changes that come into force on 2 October that will affect anyone who pays for one of its four packaged accounts.
Lloyds is upping the free overdraft limit in each case by £50 – Platinum account holders will see it rise from £250 to £300. However, it has increased the monthly overdraft fee from £5 to £6 and hiked the interest rate.
Platinum account holders will see a rise from 14.28% to 17.28%, while those on the Select, Silver and Gold accounts will pay 19.94% if they exceed their free overdraft buffer. Platinum accounts are also seeing a number of other benefits withdrawn. Fraud cover is being discontinued as part of the Sentinel service, for those who opened their account before 24 March 2012.
The move may have something to do with the arrival of Lloyds boss António Horta-Osório, who came from Santander with a clear cost-cutting agenda. He is on the record as saying that UK banks’ real problem is inefficient practices, which he intends to eradicate at Lloyds.
Meanwhile, if you are one those who has had their “free” Platinum account withdrawn, it could be time to ask whether you are getting good value from its offering.
Most people could buy the separate insurances for less than they pay the bank for their packaged account.
These accounts have long been hugely profitable for the banks, as few customers claim on policies.
Last week the Financial Services Authority said, in a bid to avoid another mis-selling scandal, that account providers will have to check whether customers are eligible to claim under each policy they sell them as part of the account. This comes into force next March.