Sometimes you have to marvel at the ingenuity of the UK banks in tackling criticism whilst protecting their income. Lloyds TSB is the latest high street giant to announce reductions in controversial unauthorised overdraft charges, whilst bumping up other fees to balance the books.

In a move designed to pacify both customers and other critics of the hefty charges, the monthly fee for ‘unplanned’ Lloyds TSB overdrafts has been scrapped and daily charges reduced. Sounds good right? How refreshing for a bank to take a financial hit in order to reduce fees for its customers.

Yeah, right. Most commentators - and no doubt many customers - noticed other charges had been introduced at the same time and the bank will no longer pay any interest on positive current account balances. In fact it’s the more ‘organised’ customers who will bear the brunt of the recent changes, with a new £5 monthly fee for planned overdrafts.

What’s more, the reductions in unplanned overdraft fees are significant, yet they were so huuuuuge in the first place that even the new, slimmer versions are pretty heavy. Anyone who is at the edge of their planned facility (already paying £5 per month for the pleasure), will then get hit with daily charges of £10 if they were to go a further £25.01 or more into the red.

For example, if you were on the limit of your planned overdraft and urgently needed £50 to pay an important bill, accessing that money for a week from an unplanned overdraft could cost you £70 in fees! Borrowing the same amount from Wonga over the same period would cost just £9.33, including our £5.50 fast cash transfer fee.

So, not only has Lloyds TSB ended free access to planned overdrafts with its current accounts (and interest payments on positive balances), but consumers could still get hit with some big costs when in need of some emergency cash. Now that’s a clever trick.�

We recently invited Wonga customers to visit London and spend an hour in a studio, talking about why they like using our online, short term loan service. Despite only offering to cover basic travel expenses, we had plenty of takers and we all enjoyed a good laugh in front of the cameras. Many thanks to everyone involved! If you are interested to know more about our flexible approach to small loans then why not listen to what genuine Wonga customers have to say? Happy viewing…

Fascinating to see the UK banks’ latest defence of unauthorised overdraft charges. They came under attack from the BBC’s Panorama programme and Vince Cable, Business Secretary, this week. Here’s an extract from a Press Association article…

The banking industry has defended its fees after research suggested people with unauthorised overdrafts were being charged average interest of 167% a year.

Business Secretary Vince Cable accused the high street banks of “ripping off” their customers and failing to be transparent over the fees they levied.

He added that consumers were losing out because of a lack of competition in a marketplace that was dominated by a small number of big banks.

There’s no doubt that the world of overdraft fees is a murky one and it takes painstaking research to fully understand all the potential fees and interest rates to be potentially encountered on the high street - despite the relatively small number of players. 

But perhaps the most interesting aspect of the story was the response from the British Bankers’ Association, who argued that:

… as overdrafts were designed to be used for only a few days, it was impossible to calculate accurate annual lending rates.

This response somewhat misses the point concerning lack of transparency, but we can’t help but agree that an annualised measure isn’t the best way to look at the real of cost of something that’s used for a few days or weeks at most.

After all, Wonga is forced to display a typical APR for our short term loan service, despite the fact that customers borrow for a few days or weeks. The nature of the APR calculation results in a completely nonsensical number, so we also show the full cost of repayment.

But impossible? No, it’s not impossible, because unsecured lenders like Wonga already have to use an annualised measure, rightly or wrongly, for a short-term loan product that can provide a much cheaper alternative to going over your limit.

Perhaps the real reason the banks don’t want to apply APR to their overdraft charges is because of the impossibly huge numbers it would generate, as we have highlighted in the past on this blog.

As the countdown to kick-off continues, Blackpool FC has secured a new signing for the club’s first season in the Premier League… Yep, Wonga has today been announced as the 2010/11 shirt sponsor!

Everyone here is bouncing around with excitement and looking forward to the new footie season with even more excitement than usual. Especially after the World Cup washout.

Our founder & CEO said of the deal, “We are still relatively young but we’re growing fast and have big ambitions, just like Blackpool. Their rise through the divisions and fairytale promotion last year was an inspiration for football fans all over the country, so it’s a great fit for Wonga.

“Seasiders are renowned for their passion, something we have bags of too. We want to help make this campaign exciting for everyone and have plenty of ideas for making a visit to Bloomfield Road a day to remember. It’s sure to be a rollercoaster of a season and we can’t wait for the ride to begin.”

The Wonga logo will be seen on the team’s shirts in all friendly, Premier League and cup games and will make a first appearance tonight, when Ian Holloway’s men travel down to Devon for their pre-season training camp.

C’mon The Seasiders!

If the economy, the budget and your own personal finances have got you down and you’re tired of hearing that you should cut back on pub nights in order to pinch a few pennies, then read on to learn our favourite credit crunch money saving tips.

Let’s start with the easy stuff:

1.  Skip the tumble dryer: Hang your clothes to air dry. In the heat we’ve been having, even your jeans will be dry by morning!

2. School run carpool: You’re all going to the same place at the same time, right? Why not create a rota with the other parents; not only will you save money on petrol, but you’ll free up some time as well.

3. Home cooked meals: Stop buying ready-meals and dining out, instead cook dinner at home. Not only will you save money, but you’ll have healthier meals as well. Pack up any leftovers for lunch.

4. Market shopping: Get out your reusable sacks and head to the market on the weekends. You’ll eat more salad and vegetables and save money – bonus!

5. Cash-back sites: If you’re going to be shopping online then shop via a cash-back site and get some money back on your purchases.

6. Charity shops: Second-hand or charity shops can have some great bargains and not just on clothes. You can find toys, games and cheap jewellery as well. Be sure to check out the shops in the posh areas as the locals tend to donate name brand fashions and other gently used items.

…and now the not-so-easy stuff:

7. Online savings account: Many online banks offer strong interest rates on their savings accounts. Search around for a great rate and start tucking away whatever you can each month to build up a nest egg or rainy day fund.

8. Think before you buy: Not as much effort as looking for a new bank account, but skipping impulse buys might be more difficult than you think. If it’s something that you WANT and not something that you need, walk away and hold off buying the item for a month. If after a month you’re still feeling the need, make cuts elsewhere in your budget to accommodate the expense.

9. Utility providers: It’s much easier to keep paying the bills that are sent to you rather than researching new utility providers, however a change could save you money. Use a comparison website or make a phone call or two; you may find a cheaper alternative who wants your business.

10. Review your insurance: Whether it’s life insurance, income protection, health insurance or just the insurance on your mobile phone, look into cheaper alternatives. The credit crunch has caused companies to review their rates and you could pinch a few more pennies in this area.

If you’ve pinched every penny and occasionally come up short, Wonga is here to help with fast, short-term loans online. We deposit cash straight into your bank account within 15 minutes of approval, 24/7. Visit our homepage and move the sliders to customise your own loan.

UK high street banks are still under pressure to reduce the fees they charge for unauthorised overdrafts, despite winning a Supreme Court case last year, but they continue to find other ways to keep the money flowing in. This recent article in the Independent highlights the ’seesaw’ approach, with some controversial overdraft fees coming down, whilst other fees for regular use of accounts go up…

… the introduction of “more transparent” daily overdraft fees from Halifax last December and the new £5 monthly fees from Lloyds TSB from this December means that customers need to grab their calculators and double-check that their bank account is the most cost-effective for the way they manage their money over the month. For example, Alliance and Leicester charge 50p per day (up to a maximum of £5 per month); Halifax charge £1 every day a customer is overdrawn (£2 per day over £2,500); and now Lloyds TSB is going to add its two-penn’orth of confusion courtesy of an additional monthly fee on top of any interest already payable.

These are not unauthorised overdraft fees the newspaper is referring to, but charges for customers accessing an approved facility. As pressure has increased on fees for going over your agreed limit - sometimes as high as £20 per day - the banks have gradually nudged up the charges for approved overdraft use, giving them the ability to bring down some of the other fees.

Some of the fee structures being implemented are no doubt more transparent than they were, at first glance, but the motives driving these changes are anything but transparent.

Wonga provides a clear alternative for anyone considering going over their overdraft limit when in need of some emergency cash for a short period of time. We are a responsible lender and the cost will be fully displayed for you, before you apply.

Check out our new TV ad, hitting the nation’s TV screens today. The theme is little loans, lots of control - as we’re the only short-term lender allowing you to control the exact size, length and cost of a cash advance.