Bank discouraging overdraft reduction

Stevie_Palimo

tobyprice wrote: »

all answers helpful thanks. I suspect if I posted this on a debt management forum, I would get very different responses, although the responses about what the banks do (and are allowed to do) would be the same. It doesn't help someone who has built up a debt to tell them to show restraint. They need boundaries and a self-managed reduing overdraft limit is one way of doing this.

Having said that, she will probably NOT reduce the limit, with our agreement, for the reasons given by the bank and above. It won't stop me canvassing for a change.

Taking a step back, from the consumer's perspective, why should reducing your overdraft limit have any negative impact, other than having less capital available in an emergency? It doesn't expose the bank to any greater risk (although it might alert them to someone who is struggling with debt) and it helps the consumer, by reducing their exposure to debt risk. The main thing the banks won't like is getting less interest once the account removes the free overdraft facility after University and that is something we should be encouraging our children to avoid at all costs.

Good luck with that then as you will have more chance of it raining £1.00 coins than implementing a change that suits you.


As others have said it is reasonable and also good practice to advise this and for you to moan after being given answers and advice is a bit rich here, If you do not like the answers given then perhaps posting on forums is not really for you.

colsten

tobyprice, you won't like much of what I have to say but I will say it anyway.

tobyprice wrote: »

It doesn't help someone who has built up a debt to tell them to show restraint.

Why does it not help them to remind them that they can't live beyond their means, and that it's their - not someone else's - responsibility to settle their own debts?

tobyprice wrote: »

Having said that, she will probably NOT reduce the limit, with our agreement, for the reasons given by the bank and above. It won't stop me canvassing for a change.

So you think your daughter has been given good advice(*) after all, but you'd rather others in similar situations would be given different advice(*)? Have I misunderstood what you were meant to say?

tobyprice wrote: »

Taking a step back, from the consumer's perspective, why should reducing your overdraft limit have any negative impact, other than having less capital available in an emergency?

Reducing your overdraft limit reduces the agreed amount of money you have access to in an emergency. This may or may not be a bad thing. What other 'negative impacts' did you have in mind?

tobyprice wrote: »

The main thing the banks won't like is getting less interest once the account removes the free overdraft facility after University and that is something we should be encouraging our children to avoid at all costs.

You are right that a major income for banks comes from overdrafts and loans. That is essentially the business banks have been in for centuries - lend money to others, charge them for it, and make a profit by doing so. Nothing new there, is there?

You are also right to say that we should be discouraging our children from taking up debt that they cannot service. The buck mainly stops with the parents, and to some extent with the schools. Your experience is a good example for why you shouldn't wait to teach your children about personal finance before they have run up a huge overdraft.

Hopefully this experience will help your daughter to take charge of her financial affairs.


* before anyone calls me up, I am not talking about regulated financial advice

SuperHan

Also, please pay attention to the lessons your daughter is learning from your response to the situation.

You are advocating that it's the bank's responsibility to ensure your daughter does not get in to debt, and that is absolutely not the case. You should be telling her that it's about resisting the temptation. Even without the overdraft limit, there's nothing stopping her running up credit card debt or loans that she can't afford to repay, and again that's not the fault of the banks.

Please make sure your attitude isn't rubbing off on your daughter to the extent that she thinks it's okay to shirk your responsibility and that someone else should always be there to stop you making bad decisions,

adindas

tobyprice wrote: »

so you're saying that banks are right to warn students NOT to reduce their overdraft limits. Even if they are struggling to manage a small debt. This seems to go against current encouragements to manage debt, many on this forum, which suggest people ask their banks to reduce their overdraft limits.

They need to let your daughter now, the fact.
If your daughter wants to reduce her OD limit or cancel the OD facility just ask her to go for it, the bank will definitely do it for her STRAIGHT AWAY ??

I am not aware any negative impact on credit rating, just the opposite, if you have an excessible OD facility it will go against you in the future when you are about to ask for major credit.

What is all about this unnecessary noise ???

tobyprice

Thanks for all the advice, especially the parental advice. I am reading and noting the good advice on here and we are together acting on it. That doesn't stop me thinking that some of what the banks are doing is wrong. Martin likes to campaign for change - I don't see why I shouldn't, especially if I am not alone. I will take this up with CAB and others who deal with debt.

colsten

If you want to campaign for something, at least have a rational case. As has been said several times, the bank did nothing wrong by telling your daughter about the facts.

Ironically, you said you now agree that your daughter should probably not reduce her limit. She couldn't have done that if she had just reduced her limit, could she? So shouldn't she/you be grateful for the bank's advice?

What change do you want to campaign for? That banks should not make people aware of the consequences of reducing an O/D limit? That banks should take responsibility for people's inability to manage their own finances? I would understand if you were going to campaign for better financial education because that's what's needed.

tomtontom

What you are campaigning for is the removal of free choice, of the ability to make an informed decision. All that would do is punish the majority, who are able to manage their affairs, for the sake of a minority who will keep messing up no matter what you do.

adindas

It seems here someone's daughter is running into debt due to her own fault and instead of blaming her why she is falling into debt try to find a party to blame as ans excuse...

What about
- A campaign for the people not to have the OD facility or CC and fall into debt in the first instance if they could not manage or control themselves
- to ask an adult to take responsibility for their own action

People who are pretty sure that the bank has been doing something wrong should take them to the court, financial ombudsman services. If the case is a clear black and white there will be solicitors out there will be more than happy to go for no win no fee basis.

tobyprice wrote: »

Thanks for all the advice, especially the parental advice. I am reading and noting the good advice on here and we are together acting on it. That doesn't stop me thinking that some of what the banks are doing is wrong. Martin likes to campaign for change - I don't see why I shouldn't, especially if I am not alone. [B]I will take this up with CAB and others who deal with debt[/B].