Natwest and the Royal Bank of Scotland (RBS) have planned to cut the interest prices on overdrafts.

The plans will come into effect on 1 October, which will significantly reduce the charges for customers who exceed an agreed overdraft or who are overdrawn in without permission.

This announcement will see the fee, for returning a cheque, direct debit or standing order cut to £5 and the cost for being overdrawn will be slashed in half - to £15 per day.

Other fees to be lowered include the guaranteed card payment charge from £35 down to £15 and the rate of unarranged borrowing has been reduced to 19.24 per cent equivalent annual rate.

RBS maintain that the support for their customers is key to the redevelopment of the bank, and that the announcement, yesterday is a testament to RBS’s continuing determination to support their customers.

Brian Hartzer, CEO of the Royal Bank of Scotland said: "This is good news for customers, not least because the fees for unarranged borrowing have been an area of ongoing concern for them.

“As we look ahead there are many issues to consider, but we thought it was time to move this particular customer concern forward by cutting our charges.”

The two banks have attempted to help customers avoid fees such as offering customers a free text alert to those who are close to reaching their pre-determined limit.

A lot is at stake for Natwest and RBS, as financial experts believe that, if the cuts were to become implemented at every bank it will heavily damage the income of  £2 billion a year.

This will prove to be a testing times for two major high street names as they will have to recoup the money by other means, which is surely going please the customers in the short-term but worry savers even more in the long term.