question about using overdraft facility

missindecisive

Hi all. Im interested in other peoples thoughts on this one.
if you have an overdraft facility on your current account, and you dip in and out of it throughout the month, but do not actually exceed it, is that considered to be a bad thing? Do you consider it to be living beyond your means?
The reason I ask is because this is my family's bank account situation. We get wages, tax credit and child benefit on various dates through the month. Most of the direct debits go out within a few days of payday. However, certain other things like food shopping and petrol for example, will go out weekly, sometimes taking the account into the red before the next credit goes into the account. There are never any bank charges, and the bank renews the overdraft every year. Would other people be happy with their account running like this? Thankyou

Archi_Bald

Overdrafts can be called in by the banks anytime they like, so it would be a lot safer for yourself if you saved up so you don't need to rely on your overdraft.

YorkshireBoy

missindecisive wrote: »

Would other people be happy with their account running like this?

I wouldn't, because it would be costing me money!


All you need is a couple of lean months to get 'in front'. May I suggest beans on toast and/or soup?...no going out?...packed lunch to work?


If you like your food too much, then how about shifting some DDs back to later in the month? Don't do interest bearing ones such as cards, mortgage, etc, just utilities, etc.


Technically, ie on a month by month basis, you're not living beyond your means (so long as the overdraft isn't increasing). However, in practice, you can't have any savings built up...so what happens when you get an unexpected bill?...because then you will have been proven to have lived beyond your means.

robatwork

I would consider this living beyond my means if it happens month after month rather than rarely.


However it's a lot better to use an arranged overdraft than go down the payday loan route...

Thrugelmir

What's your contingency plan for that unexpected bill or sudden drop in income.

missindecisive

there isn't one.:eek:

RobTang

missindecisive wrote: »

Would other people be happy with their account running like this? Thankyou

Unless you have an interest free overdraft, it will always cost you whatever interest it has been set at.


Personally I wouldn't, overdrafts are fine for occasional use, but every month I would see it as the need to start saving up to create your of "buffer" of cash for these situations, even though your books are balanced at the end of the month.

missindecisive

hello robtang...could you explain what you mean by 'buffer' of cash...do you mean build up a float in the account?

Wilkins

missindecisive wrote: »

Would other people be happy with their account running like this? Thankyou

Definitely not! So far, you have been lucky, but your luck won't always hold. The bank may call in the free overdraft (it's not making any money out of you) or start charging, or you may get an unexpected bill.


Personally, I'd be looking to build up a cash buffer of, say, at least £100 and regard that as a line not to be crossed.