Nationwide Building Society shares major update affecting current accounts holders

Nationwide Building Society is rolling out a new interest-free overdraft buffer that will let customers borrow up to £50 without racking up any interest.

Starting from Wednesday, this will be available to both new and existing holders of Nationwide's FlexPlus, FlexDirect, and FlexAccount current accounts. The building society plans to inform eligible account holders about the update.

Nationwide explained that typically, around a quarter of their overdraft users find themselves in the red by £50 or less every month, so the buffer means that such customers would incur no interest fees in an ordinary month under the new scheme. Additionally, even those who exceed this amount will see a reduction in their interest charges thanks to the buffer.

While Nationwide has stated that millions could potentially reap the benefits of this facility, they've avoided specifying exact numbers. Recent findings from a Censuswide study commissioned by Nationwide suggest the primary causes for going into an overdraft are overspending during Christmas (34%), abnormal spikes in household bills (31%), incomes that don't quite match up with escalating expenses (29%), and unforeseen charges (24%).

Out of the 2,000 individuals surveyed across the UK in October, these were the standout reasons. Marta Edwards, who heads the current accounts division at Nationwide Building Society, commented: "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."

Depending on their financial situation, some individuals might find it more economical to opt for alternatives to an overdraft, such as a credit card offering a 0% interest period. For some, dipping into savings could be a better option than accruing debt.

Rachel Springall, finance guru at Moneyfactscompare.co.uk, remarked: "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 pointed out that First Direct provides an interest-free overdraft buffer of up to £250. Ms Springall added: "There are also other bank accounts that offer up to £100 as a buffer, but many of these will charge a fee or may require minimum funding, so it’s worth weighing up any benefits to see if the account it suitable."

"Consumers who plan ahead could save a little bit each week to cover any additional costs over Christmas."

Nationwide has offered some advice to help people steer clear of 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.