Boost for customers as Lloyds to cut fees

But consumers who use an arranged overdraft facility will be hit with a new 5 charge, while standard current account customers will no longer earn interest on their money.

The group is replacing its current 15 monthly fee for people who go into the red without permission with a 5 charge for all customers who use an overdraft, regardless of whether it is authorised or unauthorised.

It is also halving the charge for an item that cannot be paid because there is not enough money in the account and an overdraft has not been arranged from 20 to 10, with a maximum of three fees charged per day.

Daily, unauthorised overdraft fees will be cut from between 6 and 20 now to 10 or less, depending on how deep into the red a customer is, and the maximum number of these charges that can be incurred in a month will be reduced from 10 to eight.

To help customers avoid the charges, Lloyds is introducing a new 10 buffer zone for both authorised and unauthorised overdrafts, on which people will not be charged fees or interest.

They will also be able to benefit from its mobile banking service, which sends customers a text message when they get close to their overdraft limit, free of charge.

The group said all customers who went into unauthorised overdraft would pay less under the new system, with 70 per cent being charged less than half of what they currently pay.

But while people with a standard current account who go overdrawn will still be charged 19.3 per cent interest, those in credit will no longer receive interest of 0.1 per cent.

The new charging structure will come into force for both new and existing customers from December 2, and Lloyds will write to all of its current account holders between July and September setting out details of the new fees.

Mike Regnier, personal current account director at Lloyds TSB, said: "We have made a whole range of improvements to our charging structure, including a significant reduction in fees." The group is the latest to change the structure of its unauthorised overdraft fees following a High Court test case on the issue.

The banks won the case, but the Office of Fair Trading is still working with them to make their charges fairer and easier to understand.