Monzo has announced that customers with lower credit scores will face higher overdraft fees.

The digital bank is the latest to unveil its fees after watchdog, the Financial Conduct Authority, demanded that overdraft charges were fairer, simpler and easier to compare from April.

Monzo is to ditch its 50p daily charge and instead bill customers on a sliding scale, depending on their credit score.

Those who go into the red will be charged annual equivalent rates of either 19%, 29% or 39%

Those who go into the red will be charged annual equivalent rates of either 19 per cent, 29 per cent, or 39 per cent.

Under Monzo’s charges, someone with a good credit rating can expect to pay £7.20 for borrowing £1,000 for 15 days – 30p less than the current 50p daily charge would cost them.

But customers paying the 29 per cent rate would pay more at £10.58, and those paying the 39 per cent rate will be charged £13.72.

The bank has started to notify customers through emails and notifications on the app.

Customers are being given the option to either switch to the regime now or stay on the current 50p-a-day rate until April. Ofelia Botella, Monzo’s marketing project manager, said: ‘We think 87 per cent of people will be better off or see a monthly change of less than £1.’

HSBC last week announced that all customers would be charged a 39.9 per cent annual rate on overdrafts – the same as some payday lenders. The rate is the equivalent of around 2.84 per cent every month.

But the charges mean those with arranged overdrafts are charged at the same rate as those who go into the red without their bank’s permission.

Experts have raised concerns that banks are sending the wrong message by punishing borrowers who have permission to spend, while allowing those who go into the red without prior agreement to pay smaller fees.

Overdraft charges made banks around £2.4billion in 2017, but the regulator demanded action over concerns that the charges were ‘disproportionately high’ for vulnerable customers.