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Plan Ahead to Keep Down the Cost of Christmas

LONDON, UNITED KINGDOM -- (Marketwire) -- 12/13/12 -- With the festive season upon us and predictions of a bumper spend on loved ones(i), first direct suggests that customers who plan to use their overdraft to cover any additional spending, review their overdraft limit so it will cover their extra seasonal purchases.

Over a third of Brits have used their overdraft in the past 12 months(i) as it is a very cost effective way to borrow in the short term and this is set to rise as the Christmas cheer gets under way. However shoppers need to understand the cost of their borrowing. Even though first direct current account overdraft interest costs have stayed the same, on average the annual cost of being overdrawn by GBP 500 for 7 days every month has almost doubled in 5 years from GBP 18.94 in 2007 to GBP 40.08 in 2012. This for many would be an unnecessary extra cost to the festive bill.

Andy Forbes, Head of Products at first direct commented, 'An overdraft is a convenient way to borrow for short periods without having to arrange a specific loan. Arranging an adequate limit on your account means you know you have the flexibility to spend up to that amount.

'With our 1st Account there is no cost for setting up or changing your limit so it makes sense to request a limit appropriate to your needs. At first direct there is no interest charged if you keep your overdraft balance under GBP 250 and higher balances are charged at a competitive 15.9% EAR.'

Andrew Hagger from Moneycomms added, 'If you ask people how much it would cost them to use a GBP 500 authorised overdraft facility with their bank, many wouldn't have a clue. Unfortunately it's not until interest charges and fees are debited to their accounts that some people realise just how expensive it can be.

'Although daily fees may be seen as more transparent and easier to calculate, it can prove to be a very expensive way of borrowing, particularly for smaller sums. A bit of planning can make an overdraft a sensible way to manage the costs of the festive period.'


                           Sept 2007                  Annual cost of        
                                                      authorised GBP 500    
                                                      overdrawn balance for 
                                                      7 days every month    
Abbey                      16.9% EAR                  GBP 19.45             
Bank of Scotland           18.9% EAR                  GBP 21.75             
Barclays (Bank                                                              
Account)                   15.6% EAR                  GBP 17.95             
Clydesdale Bank                                                             
(Current account plus)     9.6% EAR                   GBP 11.05             
Co-operative Bank          19.5% EAR + GBP 15 per                           
(current)                  annum                      GBP 37.44             
First Direct               10.9% EAR                  GBP 12.54             
Halifax (Current)          18.9% EAR                  GBP 21.75             
HSBC bank Account          18.8% EAR                  GBP 21.63             
Lloyds TSB Classic         19.3% EAR                  GBP 22.21             
Nationwide Flex            7.75% EAR                  GBP 8.92              
NatWest - Current Plus     19.9% EAR                  GBP 22.90             
RBS - interest paying                                                       
current account            19.9% EAR                  GBP 22.90             
Smile                      11.9% EAR                  GBP 13.69             
Yorkshire bank -           9.6% EAR                   GBP 11.05             
Current Account Plus                                                        
Average 14 Accounts                                   GBP 18.94 per year    

                           Nov 2012                   Annual cost of        
                                                      authorised GBP 500    
                                                      overdrawn balance for 
                                                      7 days every month    
Santander - Everyday       GBP 1 per day (max GBP                           
Current                    20 per month)              GBP 84.00             
Bank of Scotland -                                    GBP 93.80 (first GBP  
classic                    19.94% + GBP 6 pm          25 interest free)     
Barclays (Bank                                                              
Account)                   19.3% EAR                  GBP 22.21             
Clydesdale Bank                                                             
(Current account plus)     18.85% EAR                 GBP 21.69             
Co-operative Bank          18.9% EAR + GBP 20 per     GBP 41.75             
(current)                  annum                                            
First Direct               15.9% EAR                  GBP 9.15 (first GBP   
                                                      250 interest free)    
Halifax (Current)          GBP 1 per day              GBP 84.00             
HSBC bank Account          19.9% EAR                  GBP 22.90             
Lloyds TSB Classic         19.94% EAR + GBP 6 pm      GBP 93.80 (first GBP  
                                                      25 interest free)     
Nationwide Flex            18.9% EAR                  GBP 21.75             
NatWest - select           19.89% EAR                 GBP 22.89             
RBS - Select               19.89% AER                 GBP 22.89             
Smile - Current            18.9% EAR                  GBP 21.75             
Yorkshire bank -                                                            
Current Account Plus       18.85% EAR                 GBP 21.69             
Average 14 Accounts                                   GBP 41.73 per year    

Research by Andrew Hagger - MoneyComms.co.uk -22 November 2012

(i)Research by Moneysupermarket

Information about first direct:


--  Winner of Which? Best Financial Provider and Moneywise Most Trusted
    Financial Provider 3 years running 
--  Top financial institution in the Which? Customer Satisfaction Survey
    with an all-time high of 93% 
--  Ranked first in the Retail Banking Satisfaction Study by JD Power &
    Associates for two years running

first direct provides both telephone banking and online banking services to its 1.2m customers. It offers a full range of personal banking products including its award winning Current Account and offset mortgages.

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