Would you stay with a bank that didn’t give you an overdraft ?.

pinkdalek

takman wrote: »

Yes but a sensible person should have an emergency fund to cover issues like that. Then if they are not paid on time they can simply transfer the money into the account until they are paid.
If you need to go into your overdraft then that should be a big wake up call that you need to urgently sort out your finances.

You mention the benefits of a credit card for making payments. What exactly are the benefits of an overdraft for someone who is in control of their finances?, I can't think of any.

Care to read my example, the overdraft in the scenario I gave was there to cover the fact a salary payment was delayed, once the salary is received later it would clear the overdraft. Not everyone is fortunate enough to have emergency funds saved up. The only use for the overdraft in my example was due to an unforseen event where it can be repaid back at short notice - which is what an overdraft is used for, short term borrowing.

I did not say to use an overdraft for spending, in my scenario it was to use as a contigency, back up. People may be in control of their finances but it only takes an external factor (or spanner in the works) and that control can seem lost.

takman

pinkdalek wrote: »

Care to read my example, the overdraft in the scenario I gave was there to cover the fact a salary payment was delayed, once the salary is received later it would clear the overdraft. Not everyone is fortunate enough to have emergency funds saved up. The only use for the overdraft in my example was due to an unforseen event where it can be repaid back at short notice - which is what an overdraft is used for, short term borrowing.

I did not say to use an overdraft for spending, in my scenario it was to use as a contigency, back up. People may be in control of their finances but it only takes an external factor (or spanner in the works) and that control can seem lost.

But to not have any kind of emergency fund means your one step away from financial disaster. It's not about being fortunate enough to have one it's a basic financial requirement. The fact that your exanple uses an overdraft as a replacement for an emergency fund shows that it's a financial product that you shouldn't need if you have a good budget. Which makes it a poor financial product, it's like a payday loan but with a lower interest rate.

takman

TheShape wrote: »

Perhaps you're hiking through the Amazon Jungle or climbing Mount Everest on payday and can't get online or perhaps some other unforeseen event limits the availability or access to other funds.

With an authorised overdraft you have access to readily available funds 'should' you need them.

If I ever have need of it I personally can borrow £1500 from Nationwide merely by using the Debit Card that is almost always in my pocket and to do so for a day or two would cost me very little. Hopefully i'll have no need of it but it is costing me nothing to have the facility available to me.

But a credit card would cost nothing and often pay you for the privilege of using them so that is better than any overdraft.

And to answer your first point when Nationwide are paying 5% interest on balances up to £2500 then you can use that as your main account and don't have to worry about not having enough money because it will always have £2500 in it. Plus the bonus is if you need to use any of that money you don't have to pay for the privilege!.

TheShape

takman wrote: »

But a credit card would cost nothing and often pay you for the privilege of using them so that is better than any overdraft.

And to answer your first point when Nationwide are paying 5% interest on balances up to £2500 then you can use that as your main account and don't have to worry about not having enough money because it will always have £2500 in it. Plus the bonus is if you need to use any of that money you don't have to pay for the privilege!.

I already do use the FlexDirect Account as my main Account so I have available my full £2500 balance which is perfectly sufficient if I don't need access to more than £2500. I also have an additional £1500 OD available to me 'should' I need it. I don't see any benefit to myself of removing the OD from my account.

Coincidentally, I do almost all my spending on my TSB 0% purchase Credit Card that gives me 5% cashback on the first £100 of Android Pay spending and 1% on the next £500 of spending.

Your post hasn't told me anything that I'm not already aware of. I'm not suggesting that anyone should be making regular use of an overdraft, indeed I'm not suggesting anyone use an overdraft at all unless circumstances dictate that doing so is the best or only option.

eset12345

anotheruser wrote: »

I've never used an overdraft.
Why people think they are important is a mystery...

If you don't have the money, you shouldn't be able to spend any.

yes.... i'm sure you were a cash buyer with your house.

pinkdalek

takman wrote: »

But to not have any kind of emergency fund means your one step away from financial disaster. It's not about being fortunate enough to have one it's a basic financial requirement. The fact that your exanple uses an overdraft as a replacement for an emergency fund shows that it's a financial product that you shouldn't need if you have a good budget. Which makes it a poor financial product, it's like a payday loan but with a lower interest rate.

So what happens when you run out of your emergency fund?
Like I said earlier not everyone is fortunate enough to have something set asisde. Plus if they could it takes time to build that savings up.
Again you ignore the scenario I gave with the overdraft, fail to acknowledge it would work in the situation. The employee would not have to pay any interest as I stated the employer would be liable for any fees due to their mistake. Overdrafts are there for short term borrowing.

takman

pinkdalek wrote: »

So what happens when you run out of your emergency fund?
Like I said earlier not everyone is fortunate enough to have something set asisde. Plus if they could it takes time to build that savings up.
Again you ignore the scenario I gave with the overdraft, fail to acknowledge it would work in the situation. The employee would not have to pay any interest as I stated the employer would be liable for any fees due to their mistake. Overdrafts are there for short term borrowing.

The point I'm making is that just because it works in some scenarios doesn't make it a good financial product. A Payday loan could also be used in the case of an employer not paying on time, but that doesn't make it a good financial product.

If you need an overdraft for "emergencies" then that is a good indication that there is a lot of room for improvement in your finances.

takman

TheShape wrote: »

I already do use the FlexDirect Account as my main Account so I have available my full £2500 balance which is perfectly sufficient if I don't need access to more than £2500. I also have an additional £1500 OD available to me 'should' I need it. I don't see any benefit to myself of removing the OD from my account.

Coincidentally, I do almost all my spending on my TSB 0% purchase Credit Card that gives me 5% cashback on the first £100 of Android Pay spending and 1% on the next £500 of spending.

Your post hasn't told me anything that I'm not already aware of. I'm not suggesting that anyone should be making regular use of an overdraft, indeed I'm not suggesting anyone use an overdraft at all unless circumstances dictate that doing so is the best or only option.

But you have £1500 of instant credit showing on your credit report that will influence the amount of credit you can get on useful products such as credit cards.
For someone who is considered a higher risk when it comes to credit having that £1500 overdraft available may be the difference between them getting a credit card or not.

stclair

You can appeal by taking a copy of your Experian and Equifax credit report to branch and they will send it to the personal lending unit for your application to be reviewed.

TheShape

takman wrote: »

But you have £1500 of instant credit showing on your credit report that will influence the amount of credit you can get on useful products such as credit cards.
For someone who is considered a higher risk when it comes to credit having that £1500 overdraft available may be the difference between them getting a credit card or not.

It hasn't caused me any problems so far. I have more than enough credit available for the foreseeable future.

Of course there will be others with circumstances different to my own.

There is no need, of course, to have an overdraft the same size as my Nationwide one. My First Direct account has a £500 OD of which £250 is interest and fee free (that is cheap borrowing) and my TSB account has only a £50 OD of which £25 is fee and interest free.