Santander customers will face a sharp rise in overdraft fees: what will change.

Significant increase in costs for Santander customers

According to The Sun: Thousands of Santander customers will face a sharp increase in overdraft costs this autumn, as reported by The Sun.

This decision has sparked outrage, as the bank recently announced that customers will be forced to pay £120 a year for an account that was previously promised to be 'free forever.'

Changes in business accounts

From October 1, 2025, the bank will transfer customers from old accounts to new business accounts.

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 with a monthly fee of £9.99.

According to The Sun, these changes will lead to increased borrowing costs for many businesses as the interest rate on agreed overdrafts will rise to a new standard of 14.94% (EAR).

This is nearly 50% more than most customers currently paying around 10% (EAR).

Additionally, the annual overdraft fee will also increase: the minimum payment will double from 1% of the overdraft limit (minimum £50) to 1.75% (minimum £100).

This means that even businesses using overdrafts only in emergencies will have to pay more.

For example, a company with a £10,000 overdraft limit borrowing £5,000 a year will face a significant increase in costs.

Costs before and after the changes

Before the changes, the company paid £100 in annual fees (1% of the overdraft limit) and approximately £500 in interest (10% of the borrowed amount), totaling £600 a year.

After the changes, the annual fee will rise to £175 (1.75% of the overdraft limit), and interest will increase to approximately £747 (14.94% of the borrowed amount), raising total costs to £922.

Thus, the same amount borrowed will cost the business £322 more per year.

“The banking landscape for businesses has changed significantly over the last decade.'

“Therefore, we are streamlining our business banking proposition as a first step towards ensuring we can sustainably and effectively evolve to better meet the needs of our business customers in the future.”

“The overdraft fee for the Business Current Account – Classic remains very competitive.”

Other changes in the banking sector

Recently, NatWest also updated its business current accounts, increasing fees for cash deposits, cheque transactions, and some online transfers.

On August 30, cash deposit fees in business accounts rose from 70p per £100 to 95p per £100.

Cheque payments, processed manually or through the mobile app, increased from 70p to 75p per cheque.

The bank also raised some fees related to its BACS system, which is used for electronic bank transfers.

The processing fee for each individual payment increased from 18p to 21p.

Customers applying for a Santander Edge Credit Card now face a monthly fee of £4, up from the previous £3.

Additionally, soon customers of Lloyds Bank, Halifax, and Bank of Scotland will lose the ability to deposit cheques at any of the 11,500 post office branches across the country.

As of December 31 this year, the Lloyds Banking Group will remove this service for all customers.