Overdraft.....or no to overdraft....

[Shropshire Seagull]

I think it comes down to how smart / responsible you are with money.

I have both Halifax & Santander current accounts with overdraft which charges a flat rate of £1 per day if you use it - regardless of how much you use. No other charges for the facitlity.

Now, for example., if I have a bigger than expected credit card statement, I can pay that off a few days before eg salary goes into current account. I may pay a £5 [for 5 days credit] but if this then means paying nothing in interest on the credit card - its actually saving me money.

Key is, only take it if they only charge for when you use it [ie no annual fee] - and only use it when you really need to and in very sort bursts [eg mini bridging loan] - don't see it as another line of credit [that's yours to spend].

 

[lawros left foot]

I thought you only got charged if you went over your overdraft limit? Mines £250 and I never seem to pay a fee but I went over it a couple of times and was charged £8.50? I'm with Barclays btw.

I think you get a certain amount free, mine is £500, but if I wanted say a 2 grand one, i would be charged a percentage of the extra fifteen hundred every month wether I used it or not,it used to be one %, don't know what it is now

 

[seagullsovergrimsby]

Banks love overdrafts. Basically, they give you a couple of grand of their money, which you spend, then continually pay interest on it monthly, and STILL owe them the two bag...

This

 

[wakeytom]

My advise is not to spend any money that is not yours. Even if you had it for emergency's only, you may dip into it. Turn them down and if you manage your account correctly the offer will always be there in the future. I do remember Martin Lewis saying that an overdraft is an expensive way of burrowing money. If you do need some extra money, a loan from your bank will work out cheaper.

Terrible advice - firstly dont hide your money in the ground as it will just get wet, secondly in what way will it work out cheaper, if you require funds to pay a bill that is a couple of days earlier than expected then an overdraft is a cheaper and quicker way of borrowing generally than a loan, even if it is for a number of weeks with a loan you will normally pay an early repayment fee where as with overdraft you will just be charged for the period you used it and no more (unless your bank charges an arrangement fee which many dont)

 

[seagullsovergrimsby]

I've had the same current account since 1980 (National Girobank -> Alliance & Leicester -> Santander) and never been in the red. Overdrafts can put you on the slippery slide to massive debt , paying off one debt but creating another elsewhere. My philosophy is if you can't afford to pay for something upfront the only alternative is to save up for it.

 

[wakeytom]

Business overdrafts incur an annual fee, but most banks will not charge for overdrafts on personal accounts, unless you go over the agreed amount. As a previous poster said, why not take a smaller overdraft, say £500.

Seconded. Personally I have a larger overdraft but have been in a lucky position to not require it now for probably some years, best way is to try and not be reliant on it but I know if something happens I have roughly my monthly pay available on overdraft so an early bill or something I need to pay for can be covered

 

[Creaky]

I think you get a certain amount free, mine is £500, but if I wanted say a 2 grand one, i would be charged a percentage of the extra fifteen hundred every month wether I used it or not,it used to be one %, don't know what it is now

I'd change banks in that case!

 

[smudge]

Pretty obvious that if you don't need it, don't do it. Like others have said, slippery slope.
I have a decent OD amount that I can fall back on, yet the bank still charges me a quid a day if I use it. Not a big deal, but the principle of it stinks.
Due to several issues I've had I will be changing banks when I get home, Halifax have caused me no end of trouble.
I'm thinking Lloyds, but if anyone out there has any advice I'd welcome it.

 

[KingKev]

Banks love overdrafts. Basically, they give you a couple of grand of their money, which you spend, then continually pay interest on it monthly, and STILL owe them the two bag...

If it is for emergencies, take it out when you need it. They know people will dip into it despite best intentions...

Overdraft charges and the like, paid by the minority of users, are effectively what allows the banks to give the rest of us free banking on standard personal current accounts (or better given decent interest rates on some accounts now). So my request is yes please use the o/d, at least occasionally, so that I can keep my own free banking.
My advice, however is very similar to others, which is if you don't trust yourself to manage within your means in the mid / long term then steer clear. If you are good at self-management then a no/d can be a very useful tool for managing short-term cash flow issues...

 

[Triggaaar]

It's simple - if you have the self control to not use it, then get it.

This

Never borrow money unless you have to.

I assume this doesn't include buying as house?

 

[Nitram]

A planned overdraft at Lloyds is free. We have had one for £2500 for years. Occasionally go into it by a few pounds near payday, but never more than £100. It takes the worry and cost out of the equation, but if you are a person who maxis out their credit card then it's not a good option.

 

[Spun Cuppa]

Overdraft charges and the like, paid by the minority of users, are effectively what allows the banks to give the rest of us free banking on standard personal current accounts (or better given decent interest rates on some accounts now)... So my request is yes please use the o/d, at least occasionally, so that I can keep my own free banking.
My advice, however is very similar to others, which is if you don't trust yourself to manage within your means in the mid / long term then steer clear. If you are good at self-management then a no/d can be a very useful tool for managing short-term cash flow issues...

...and make profits that run into billions

 

[KingKev]

...and make profits that run into billions

Not on Personal Current Accounts they don't. It's a pretty fine margin game with huge regulatory, infrastructure and operational costs. Eg every time you use an ATM that's not your banks', it costs them 30-40p. Every time you make a faster payment or bacs-based payment it costs them cash. When you want them, you insist they are available - phone, internet, mobile, branch - that does not come for free, but unless you step outside the terms of your account agreement ( eg by running up an overdraft) you will not be charged for the huge convenience and generally very good service that banks give on Current Accounts.

 

[GoldWithFalmer]

Pretty obvious that if you don't need it, don't do it. Like others have said, slippery slope.
I have a decent OD amount that I can fall back on, yet the bank still charges me a quid a day if I use it. Not a big deal, but the principle of it stinks.
Due to several issues I've had I will be changing banks when I get home, Halifax have caused me no end of trouble.
I'm thinking Lloyds, but if anyone out there has any advice I'd welcome it.

Forget Lloyd's,part of the same RBS group,the on-line banking is the same,i think they don't even pay interest on current accounts that have over £5000 balances but could be wrong,also their base rates to borrow seem 3 or 4% higher than say for example Nationwide.. Think you could do better.