When did it become normal to have an overdraft

gfplux

Hello All,

This is not "have a go at people with overdrafts" thread.

It is just to find out how it is that so many people on this site have an overdraft.
I know this site is a self selective group of people who are interested in saving money but when did it become "NORMAL" to have an overdraft.

I am over 60 and have never had an overdraft in my entire life. Most of my financially productive life was in the 70's, 80's and 90's and when first staring work in the late 60's I thought overdrafts were for rich people, very strange I know but that is what my mother told me.
Later on I thought of overdrafts as inefficient, dangerous and expensive.
If I needed long term credit I had a mortgage, for medium term credit I would take a loan, pay it off and if needed I would take another loan.
If I needed short term credit (30 days or less) I used one of my two credit cards both of which had large limits that I paid of each month.

However back to the question. How did it become normal for ordinary working people to have overdrafts.
Am I right in thinking to assume that Banks thought this was an extra way to make money and therefore promoted it. That this was a new profit centre as credit cards and loans were making money for other financial institutions or departments but banks were the only ones who could offer this type of "pay day loan"

Joe_Bloggs

If there is a way to exploit people in financial difficulty then the banks will find it. Once the banks are in trouble then it is the burden of the people to rescue them. They deserve every penny of their bonuses by seizing the tipping point of the economy.
J_B.

apt

This country, unlike much of continental Europe, has a spending rather than saving culture. There's also a tendency - not absent on this site - to look for loopholes and shortcuts rather than living solidly within your means. One change in the past two decades, which is not really down to the banks, is that it is now very difficult to graduate without a large debt in the form of an overdraft and student loan.

minerva_windsong

apt wrote: »

This country, unlike much of continental Europe, has a spending rather than saving culture. There's also a tendency - not absent on this site - to look for loopholes and shortcuts rather than living solidly within your means. One change in the past two decades, which is not really down to the banks, is that it is now very difficult to graduate without a large debt in the form of an overdraft and student loan.

I'd agree with that - most people I knew at uni were in their overdrafts by some margin, and the majority were in them to be able to live (paying deposits on uni houses for example) rather than by spending 'free' money on stuff they didn't need.

That said though I think that banks can be far too free with giving out credit and are not entirely blameless in this.

ben500

Somewhere along the line the British public lost the ability to distinguish between NEED and WANT.

Milarky

I've just looked this up. I didn't 'use' my bank overdraft until one time in February 1991 when I made the mistake of only crediting just enough to pay the mortage payment on the same day as the mortgage payment itself. This was bounced because my OD was only for £100 - and not enough therefore. But I had been unware of what that OD limit was anyway! Thus started the gradual process of increasing bank overdrafts. I asked what could be done and was told they could double my limit to £200 - which, acting as a buffer alone, would allow me to cover the DD being on the day of collection.

Later (1998) I recall asking for a larger OD (for some reason, I can't recall) and it was raised to £700. Later again (2000) it was raised to £1500 because I was now using the account to have large amounts taken by DD (share buying settlement)

So, I had increased my overdraft facilities because I had come to use a current account somewhat differently (i.e. low operating balance and more and more use of DD as a means of payment) so required as large a 'buffer' as possible.

But I have never 'lived' on the overdraft - other than in the sense of using 0% offers to boost interest in other accounts. If banks want to discourage people like me, however, they'd have to take aways facilities from people that do 'live' on their overdrafts...

Paul_Herring

gfplux wrote: »

but when did it become "NORMAL" to have an overdraft.

About the same time credit cards became ubiquitous, and/or it became common to not pay off the whole amount on them each month.

margaretclare

It isn't 'normal'.

Paul_Herring

margaretclare wrote: »

It isn't 'normal'.

It's 'normal' enough, such that an OD is sometimes seen as a right, usually seen as a feature of a current account, and they are in common use.

Which fits the description of 'normal' for most people.

Oldernotwiser

I first had an overdraft when I was a student in the mid 70s, although I'd had credit cards for several years before this when I was doing pretty basic clerical work. Neither of them are anything new except for the degree of availability.

Joe_Bloggs

If you are either rich or savvy with money matters then an overdraft is a convenient feature that mitigates excessive bank charges during a period of excessive expenditure.

If you are poor and yet to be informed then living on an overdraft should be a short term measure. Unfortunately a dependency culture has been built up around the overdraft and the bogus apparent generosity of banks.
J_B.