Nationwide Building Society issues major update around new perk for current account holders

Nationwide Building Society is introducing a new perk for current account holders starting this week.

Nationwide have introduced an interest-free overdraft buffer, allowing customers to borrow up to £50 without accruing any interest. This will be available for both new and existing holders of Nationwide's FlexPlus, FlexDirect, and FlexAccount current accounts.

The building society plans to notify eligible account holders about the update. Nationwide revealed that typically, around a quarter of their overdraft users find themselves in the red by £50 or less every month.

Therefore, such customers would not incur any interest fees in an ordinary month under the new scheme. Even those who exceed this amount will see a reduction in their interest charges due to the buffer.

While Nationwide has stated that millions could potentially benefit from this facility, they have not provided specific numbers. A recent Censuswide study commissioned by Nationwide suggests the main reasons for going into an overdraft are overspending during Christmas (34%), unexpected increases in household bills (31%), incomes not keeping pace with rising expenses (29%), and unforeseen charges (24%).

A recent survey of 2,000 individuals across the UK in October revealed the main reasons for relying on overdrafts. Marta Edwards, head of current accounts at Nationwide Building Society, said: "Most people use an overdraft occasionally, but if you are worried about your reliance on it then get in touch with your bank or building society as they will have a range of support available.", reports the Mirror.

For some, exploring alternatives to overdrafts, such as 0% interest credit cards or dipping into savings, might be more cost-effective.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, noted: "It is somewhat inevitable for there to be consumers who will need to dip into their overdraft slightly to cover the festive splurge, so having the right bank account to avoid paying any sky-high overdraft charges is wise."

She highlighted First Direct's interest-free overdraft buffer of up to £250 and other accounts offering up to £100 buffers, but cautioned that some may come with fees or minimum funding requirements. Springall suggested: "Consumers who plan ahead could save a little bit each week to cover any additional costs over Christmas."

Nationwide has provided guidance to help individuals avoid overdrafts.

1. Keep a close eye on your account-20% of those surveyed by Nationwide admitted they slipped into their overdraft because they weren't monitoring their spending.

2. Think about having separate accounts for essential bills and discretionary spending. Calculate your disposable income each month and consider transferring it to a different account to simplify budgeting.

3. Set up text alerts. You can set up an alert on your accounts to receive a text when you've dipped into the overdraft. This can prompt you to take action and move money from elsewhere to avoid overdraft charges.

4. Get into the savings habit. By steadily building up a pot of money, you have something you can dip into to cover unexpected bills or the costs of Christmas. Consider comparing savings accounts and the rates on offer to find one that suits your needs.