How does a bank decide your overdraft limit?

HappySaver1968

Hello,

I'm looking for some advice please. Do you know how a bank decides how to set your overdraft as whatever limit it may be? could I ask what the average overdraft limit is here in the UK? I recently joined the Bank of Scotland and they've set my overdraft limit as £100... seems a little low, what do you think? they did mention it should be raised after I've been with them for a while.

John.

MoneySaverLog

Probably related to what is paid in every month, and how long you've been with the bank. I think most banks give the standard £500 overdraft on an account if you ask for it, subject to status.

Best to just have it in place for emergencies, and live on what you have than live within the overdraft though.

opinions4u

I recently joined the Bank of Scotland and they've set my overdraft limit as £100... seems a little low

Why do you need more?

You've been with the bank 5 minutes and you think they should be throwing money at you?

could I ask what the average overdraft limit is here in the UK

I don't know the answer to your question, but I do know that around 70% of current account customers NEVER go overdrawn. Somewhere between 5% and 15% actively rely on their overdraft.

HappySaver1968

opinions4u wrote: »

Why do you need more?

You've been with the bank 5 minutes and you think they should be throwing money at you?

I don't know the answer to your question, but I do know that around 70% of current account customers NEVER go overdrawn. Somewhere between 5% and 15% actively rely on their overdraft.

Peace of mind. I've never had to use an overdraft, but I like to know it's their... should I need it.

John.

opinions4u

HappySaver1968 wrote: »

Peace of mind. I've never had to use an overdraft, but I like to know it's their... should I need it.

John.

Give it time. Use your account well. The available limit will grow .

2sides2everystory

John, I'd say you may be in the wrong place now for useful overdraft facilities. Two decades ago in the UK, maybe even one - yes, of course Sir, an overdraft facility - let's see what we can do for you (and they did).

UK has been through a number iterations of consumer lending over the past few decades. The totally uncontrolled credit card market of the late nineties and early noughties ultimately removed a lot of trust between banks and customers. First the card issuers sucked them in with discounted debt (yes you heard me right - never mind BT fees, even Barclaycard was offering 2% discount on BTs!). Then after it all went bad (some people had twenty accounts or more) the issuers finally spat it all out again.

Simultaneously banks turned their attention back inwards and messed up the current account business as well so there is no trust there either.

Banks still float the suggestion of large overdraft facilities for students, but very few have actually managed to avail themselves of the higher limits in the last three years.

The facilities I have managed to retain over the years include two at £5,000, one at £1,000, (probably because I have rarely used the overdrafts for anything at all) and three or four in the low to mid hundreds on accounts I hardly use either. The limits have very little to do with my income but may have something to do with annual account turnover (same money may come in to account more than once if it has been out invested somewhere else temporarily - that makes the account look more active/attractive to some banks). You are a HappySaver so you know what I mean if you take advantage of fixed interest regular savings accounts for example. After 12 months maybe that money comes back into your main account bolstering the apparent income for that banking year.

However, I would be surprised if any poster disagrees that it is an almost unfathomable game to start now in the UK (collecting a decent overdraft or two), and quite honestly, you'd probably be far better using your time concentrating on how you can raise your game/income at work than trying to second guess how you get a decent overdraft out of the current high street sales teams.

I did have one other £5,000 facility withdrawn because I rather stupidly let the account go dormant (yes I had three once!). I have lost a few other inbetweeners for the same reason.

Had I known what I know now, I'd have kept them all nicely active with standing orders sending the money round in circles, mixing up the direct debits a bit and using the cards once in a while. After a while however, it all got a bit boring and there are more important things to worry about, eh ?

Good luck - it might be worth running a couple of additional accounts with different banks just to see what shakes out in 6 months. Sometimes you suddenly find that this month your number came up and the computer says you are good for a four figure facility. The only problem is that you might have to risk a regular sit-down visit in a branch to ask them what they can see on their screen. You don't want to be processing constant real applications for fear of getting a history of credit searches that suggests you are desperate.

izools

HappySaver1968 wrote: »

Hello,

I'm looking for some advice please. Do you know how a bank decides how to set your overdraft as whatever limit it may be? could I ask what the average overdraft limit is here in the UK? I recently joined the Bank of Scotland and they've set my overdraft limit as £100... seems a little low, what do you think? they did mention it should be raised after I've been with them for a while.

John.

I think you must have very little credit history and / or a low monthly account turnover / low average balance.

I recently opened a Halifax / Bank of Scotland account and they happily approved the £300 overdraft limit request I made despite my having a very poor credit file with a history of Bankruptcy four years ago.

As long as you run the account well, keep a high average balance, stay out of your overdraft, and keep your levels of debt low elsewhere whilst continuing to pay everything on time you should have no trouble having the bank approve you for higher lending limits in the future, but don't expect anything to change for at least six months