Lloyds TSB is to cut the overdraft fees on its current accounts from 2 December.

The bank, which is part government owned, will cut the daily and monthly fees for customers who go overdrawn without permission. The fee for bouncing a cheque or direct debit will also be halved to £10.

Many see this move a result of pressure from the coalition government but it comes at a cost to current account holders as the bank will no longer pay the current 0.1% interest.

There will be no change to customers that go into the red; they will still incur a charge of 19.3%.

A summary of the main changes:

• A £10 ‘buffer zone’ - customers who slip into the red by up to £10 will not have to pay any charges
• the £20 fee for bouncing a cheque or electronic payment will be cut to £10, with a continued maximum of three such fees per day
• for unplanned use of either an authorised or unauthorised overdraft then the  £15 a month fee will be cut to £5
• daily fees for being overdrawn will be reduced from between £6 and £20 to between £5 and £10
• the maximum number of such daily fees that will be imposed is going down from 10 a month to 8.

Some agencies argue that despite the cuts it would still be expensive for those that went overdrawn without the bank’s permission, citing that the customer could be charged £40 per day for up to eight days of the month making a monthly charge of £320. Also those customers with authorised overdrafts will now have to pay £5 whereas they did not before.

More information can be found here LloydsTSB