Why are Overdraft funds, Demanded back by the banks?(-£xxxx) which circumstances ?

Danny_G

When you have an overdraft, and you are into it, i heard that the banks can demand to give if back

(say if you have used the majority of the funds, from the overdraft so are in -£xyz)


but isn't it also on their policy that they can Demand this money to be paid back immediately?

which circumstances/conditions can this be ??

which cases?

as this instant demand can cause pressure if the funds cannot all be paid.... right ?

(I mean when you are actually in your Overdraft balance - and they demand it to be paid back immediately

- which situations do they do this? and why?

-give some instances please

Plxply

They feel that you're abusing the facility for example you've lost your job and would be unable to pay back the overdraft. You often exceed the overdraft limit. They think you have too much available credit and are anxious you will use it all at once. Something indicates you're in financial difficulty etc.

There are millions of reasons why they can remove your overdraft.

Danny_G

Plxply wrote: »

They feel that you're abusing the facility for example you've lost your job and would be unable to pay back the overdraft. You often exceed the overdraft limit. They think you have too much available credit and are anxious you will use it all at once. Something indicates you're in financial difficulty etc.

There are millions of reasons why they can remove your overdraft.

how many months would you have to be in overdraft, (with only paying back the minimum payment every month)

to raise alarm bells, for them to realise and stop your overdraft (after you fully pay it back that is)

YorkshireBoy

Danny_G wrote: »

how many months would you have to be in overdraft

No one here can answer that as there's no one size fits all approach

(with only paying back the minimum payment every month)

Overdrafts don't have a minimum payment. You're perhaps confusing them with credit cards?

to raise alarm bells, for them to realise and stop your overdraft (after you fully pay it back that is)

If you repay an overdraft regularly, by the crediting of your salary etc, then they're less likely to remove the facility.

Probably the most common reason for the pulling of an overdraft facility is a reduction in, or total lack of, monthly credits to the account whilst (heavily) into the red.

RobTang

Danny_G wrote: »

- which situations do they do this? and why?

The main reason I would guess is they think you are going to go bankrupt or no longer want to carry the risk associated with your overdraft

Overdrafts are a good cash cow for the bank BUT its no good if you cant pay it (ie go bankrupt) this is a risk for them so want to get rid of it (ie you just pay the money from somewhere) or the put you on a product that is less risky (and less profitable) for them (ie a regular loan)

meer53

Every bank has different criteria, no-one can answer your question.

stclair

Natwest/RBS will pull the plug if they get feeds from the CRAS that your struggling elsewhere.

But as meer53 says every lender will have there own policy.

lazer

Most common one is that the account holder isn't using their overdraft as their main account

ie: No money going in!

It is against the terms and conditions of most current accounts to use it only for the overdraft.

DCFC79

Is there a particular rason your asking Danny ?

exel1966

Danny_G wrote: »

When you have an overdraft, and you are into it, i heard that the banks can demand to give if back

(say if you have used the majority of the funds, from the overdraft so are in -£xyz)


but isn't it also on their policy that they can Demand this money to be paid back immediately?

which circumstances/conditions can this be ??

which cases?

as this instant demand can cause pressure if the funds cannot all be paid.... right ?

(I mean when you are actually in your Overdraft balance - and they demand it to be paid back immediately

- which situations do they do this? and why?

-give some instances please

There's a very common misconception that overdrafts are the same as loans. They are not, they're designed to be used for very short term cash flow problems, not continually to be at/near the limit though they are exploited/used by those in debt (catch 22) and those who can make money from them.

As long as you reasonably manage your account, don't regularly flout the terms and regulary make payments into the account the chances are you'll keep it. A one off breach, overlimit, failed DD will not mean removal, regular occurrences possibly will. The consistent use of an O/D followed by ceasing credits into the account will alert the bank to possible difficulties, therefore they could lower/recall the O/D.

Missed payments on credit cards/mortgages/loans/finance will be reported to CRA's. The bank will see these and see you as a greater potential risk, result O/D removal/decrease.

Frequent applications for credit elsewhere will also alert your bank. They may feel you have too much available credit. You have to be reasonably clean across the board. It's not just what occurs internally within the bank, but what occurs with every finance company you have dealings with. They all impact on each other which is why it's so important to manage your finances well (responsibly).

Have you had your O/D decreased/recalled?

Milarky

This is off topic but the standard term which slightly worried me was that my mortgage was repayable 'on demand' as well as my overdraft. Clearly a 'nuclear option' (they'd have to ask everyone else - so they wouldn't). This thinking was all back in the days when investments still paid out 'more' than you'd paid in, inflation wasn't a Mills & Boon affair, house prices were staid and boring, the average man weighed under 13 stone (I could go on...)