THOUSANDS of Santander customers face a sharp rise in overdraft costs from this autumn, The Sun can reveal.
It comes just weeks after the bank sparked outrage by revealing customers would soon have to pay £120 a year for an account it once promised would be “free forever”.
Even businesses that keep an overdraft for emergencies but never use it will soon have to pay more[/caption]
From October 1 2025, the bank is moving customers from older accounts onto a new business account.
This change affects 1|2|3 Business Current Accounts, Business Everyday Current Accounts, and Business Current Accounts, leaving thousands of small businesses and self-employed customers facing a £9.99 monthly fee.
However, The Sun can now reveal that the shake-up means borrowing costs will soar for many firms, as any arranged overdraft interest rate will also jump to a new standard of 14.94% (EAR).
This is a near 50% increase for most customers who currently pay around 10% (EAR).
On top of this, the annual fee for having an overdraft will rise, with the minimum charge doubling from 1% of the overdraft limit (minimum £50) to 1.75% (minimum £100).
This means even businesses that keep an overdraft for emergencies but never use it will have to pay more.
For example, a business with a £10,000 overdraft facility that borrows £5,000 for a year will see a big jump in charges.
Before the changes, the business would pay a £100 annual fee (1% of the overdraft limit) and roughly £500 in interest (10% of the amount borrowed), totalling £600 for the year.
After the changes, the annual fee rises to £175 (1.75% of the overdraft limit) and interest increases to around £747 (14.94% of the amount borrowed), bringing the total to £922.
This means the same borrowing will cost the business an extra £322 every year.
A Santander spokesperson said: “The business banking landscape has changed significantly over the last decade.
“As such, we are simplifying our business banking offering as the first step to ensure that we can sustainably and efficiently evolve to better meet the needs of our business customers in the future.
“The overdraft fees for the Business Current Account – Classic remain highly competitive.”
The bank added that a small number of customers on an older, high-interest account may see their costs fall if they are heavy overdraft users.
How do I switch bank accounts?
SWITCHING bank accounts is a simple process and can usually be done through the Current Account Switch Service (CASS).
Dozens of high street banks and building societies are signed up – there’s a full list on CASS’ website.
Under the switching service, swapping banks should take seven working days.
You don’t have to remember to move direct debits across when moving, as this is done for you.
All you have to do is apply for the new account you want, and the new bank will tell your existing one you’re moving.
There are a few things you can do before switching though, including choosing your switch date and transferring any old bank statements to your new account.
You should get in touch with your existing bank for any old statements.
When switching current accounts, consider what other perks might come with joining a specific bank or building society.
Some banks offer 0% overdrafts up to a certain limit, and others might offer better rates on savings accounts.
And some banks offer free travel or mobile phone insurance with their current accounts – but these accounts might come with a monthly fee.
What other banking changes are coming?
NatWest has recently made changes to its business current accounts by increasing fees for cash payments, cheque transactions, and certain online transfers.
On August 30, fees for cash payments into and out of business accounts increased from 70p per £100 to 95p per £100.
Cheque payments, whether processed by hand or via mobile, also jumped from 70p to 75p per cheque.
The bank has also increased some charges related to its BACS payment system.
The BACS system is a UK payment network used by businesses to make electronic bank-to-bank transfers, such as Direct Debits and Direct Credits.
The fee for processing each individual payment or instruction, rose from 18p to 21p.
The cost to process a file containing multiple payments or instructions has also risen slightly from £5.25 to £5.35.
Meanwhile, customers applying for the Santander Edge Credit Card now face a monthly fee of £4, an increase from the previous £3.
Plus, customers of Lloyds Bank, Halifax and Bank of Scotland will soon lose the ability to deposit their cheques at any of the 11,500 Post Office branches nationwide.
From December 31 this year, Lloyds Banking Group will withdraw this service for all customers.