Barclays Bank has reduced its unplanned overdraft fees to £8 per day, down from £40 each day earlier, which is expected to help customers save £7m a year in fees.

The move by Barclays is part of its plan to gain advantage in the increasingly competitive personal banking market.

Currently, the banks can charge a customer every time a transaction is failed due to insufficient funds in account. However, the introduction of strict ‘one per day’ cap will allow customers a chance to sign up to receive new text alerts, allowing them to clear their funds and avoid overdraft fees.

Barclays retail and business banking CEO, Ashok Vaswani, said January can be a difficult month for customers to make ends meet as they may be catching up with the cost of Christmas.

"No-one wants to be charged because they hadn’t been warned that a transaction would fail, or from simply going a few pounds into the red, which is why these changes are important.

"We know that text alerts, buffers and caps are putting customers in control and helping them to save money which is why we are now extending them to a wider range of fees. These changes will cost us money, but I believe that our customers will value the fact that we are doing the right thing by them," Vaswani added.