Bit miffed on son's behalf.....

beedeedee

OK, so son has had a £750 overdraft facility on his LLoyds a/c for many years. He's never used it and his credit card with them is usually paid off every month. He has no other debts at all, but has had loans from them in the past, when needed - all paid up and on time. He has some long term investments/savings. A reasonably good risk you would think?
Out of the blue, he's had a letter saying the overdraft facility is being cut to £200 because he doesn't use it. He has always liked having the £750 o/d available - just in case! He nipped into the bank the same day to ask them to restore the limit - but the computer says no, as he has never used it........... and there was apparently no way anyone could overide it!
I just feel a bit miffed for him. Obviously brought him up wrongly.........?

custardy

Is it a free OD? Simply start dipping into and clearing it every month.
They will soon up it again.

PasturesNew

They do it because the bank has to be able to cover that £750 if he did want to use it. They effectively have to keep £750 in their drawer "just in case" - and as he's never needed it they would now like to use that money to lend to somebody (say, for a mortgage) ... but they can't as your son might fancy using it.

Although banks create money, it doesn't all come out of thin air - and they have a limited pile of fake money available to be sitting round in drawers in case somebody wants to use it.

In this way, unable to lend that money out to somebody else, it effectively costs the bank money (in lost interest potential).

beedeedee

custardy wrote: »

Is it a free OD? Simply start dipping into and clearing it every month.
They will soon up it again.

I did wonder if that would happen ? Can't imagine it's free though........

beedeedee

"Although banks create money, it doesn't all come out of thin air - and they have a limited pile of fake money available to be sitting round in drawers in case somebody wants to use it."

Thanks Pastures New - I do understand - but loving all this fake money the bank has.............!

MABLE

I have a £10,000 overdraft facility with them and never paid a penny for using it. If a large bill is due I pay it in the morning with the overdraft but ensure the account is back in credit by 3.30pm to avoid any fees.

That way it seems to keep Lloyds happy I am making use of the facility and will hopefully stay at that level until such time I say otherwise.

beedeedee

Thanks MABLE, that's interesting. I'll suggest he gives me £750 by using it before it gets reduced in August, then I'll give it back and he can put it back in his a/c the same day.....and we'll see if they restore the o/d to it's original......

MABLE

beedeedee wrote: »

Thanks MABLE, that's interesting. I'll suggest he gives me £750 by using it before it gets reduced in August, then I'll give it back and he can put it back in his a/c the same day.....and we'll see if they restore the o/d to it's original......

That reminds me about 6 years ago they wanted to decrease my overdraft because I was not using it enough. However the strange thing is I used it and went about £300 overdrawn. Then without any input from me they said as I had used it they would keep it at the same limit.

Your plan may work and worth a try.

fozmcfc

PasturesNew wrote: »

They do it because the bank has to be able to cover that £750 if he did want to use it. They effectively have to keep £750 in their drawer "just in case" - and as he's never needed it they would now like to use that money to lend to somebody (say, for a mortgage) ... but they can't as your son might fancy using it.

Although banks create money, it doesn't all come out of thin air - and they have a limited pile of fake money available to be sitting round in drawers in case somebody wants to use it.

In this way, unable to lend that money out to somebody else, it effectively costs the bank money (in lost interest potential).

I've had a £5k overdraft with Natwest for 5 years + and haven't used a penny of it ever, so not sure, that banks always reduce/remove limits, if it's not used.

It might depend on, if someone is worth keeping as a customer.

With Natwest, I have banked with them for 28 years and have what I would consider substantial savings with them and perhaps, my account has a marker to say, don't risk upsetting/losing customers account.

colsten

fozmcfc wrote: »

It might depend on, if someone is worth keeping as a customer.

It is nice to think a bank might care about the custom of an individual account holder, but in reality it is a lot more likely to do with the policy the bank has at any point in time regarding the reserves for overdrafts. See the earlier post by PasturesNew.

YorkshireBoy

fozmcfc wrote: »

With Natwest, I have banked with them for 28 years and have what I would consider substantial savings with them...

Why? They're not known for good interest rates are they? Or maybe it's an offset savings account linked to a mortgage?