Why Would Bank Reduce My Guaranteed Overdraft Limit When I'm Always In Credit?

ladyrider260

I am one of the lucky folk with no debts. My Experian credit report came back as excellent & I am never late with payments.

My bank regularly up my guaranteed overdraft which can be increased immediately online.

I don't want to give exact figures but for example, I have an arranged overdraft of £1000. I can increase that overdraft to £2000 immediately online and periodically it goes up by a couple of hundred pounds, I assume that's because I manage my account so well.
I've just checked my online banking & for some reason my bank have reduced my overdraft down to the arranged sum of £1000, so I am unable to increase it if required.

I wondered if anyone knew why they have done this? I'm now concerned as I've built up a good overdraft limit by careful management and it's reassuring to know it's there. The only think I can think of is that I had one late payment due to my store card company 'not receiving' my cheque, but surely this wouldn't cause my bank of 10yrs to suddenly think I'm a risk?

Extant

Banks periodically review overdrafts, as they pose various accounting problems when they're sat unused. It is, in short, about reducing overall risk.

It's not necessarily a comment about your credit worthiness, it's just bank operations. You should normally be informed, though.

opinions4u

The credit crunch is the main reason.

Banks have less money to lend following the reduced availability of wholesale funding.

But if more customers dip in to their previously unused overdrafts, as happens in a recession, they will have lent more money than they actually have available!

In other words, it's more a comment on the credit-worthiness of the bank than their customer! They are managing their balance sheet and, as BM suggests above, their risk profile.

My recommended limit has mysteriously gone from £10k to NIL for no obvious reason!

LeeSouthEast

Mine with Barclays last year was on a bit of a yoyo ride. It seems to have stabilised at its original requested value again for the last 6 months.. I guess banks are just reducing their overall exposure risk, and it isn't necessarily a reflection of your circumstances.

ladyrider260

Thanks guys, what you say makes sense. I started to get worried!!

never-in-doubt

It isn't Halifax is it? You know their o/d's change daily and are random amounts.... some people have £15k one day and £0 the next!

melorablack

Because you aren't using it and to reduce the risk of fraud eg: if someone gets holdof your bank details, intead of having £500 to spend of your overdraft, they only have £250. They do the same with credit limits on credit cards.