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

anotheruser

pinkdalek wrote: »

...so let's use an example where there is an issue with a salary payment being delayed, this causes direct debits not to be paid...

If you are living pay day to pay day like that, with no other funds, and ALL your salary coming out, something is seriously wrong.

pinkdalek wrote: »

...oh what a narrow minded view or opinion. If that was the case no one would own a house or get a mortgage.

Don't be pedantic. Things like mortgages are completely different to people who get a loan out "to buy Christmas presents", knowing they will struggle to pay it back.

pinkdalek wrote: »

Not everyone with credit cards/overdrafts spends stupidly.

I agree. However if you have an account that is pretty much always over £1000, which I would hope to be most of us, then the aim would be to never let it drop below that.
In fact, if you have an account that's over £5000, I would find it very hard to see (on a general day-to-day, month-to-month) how it would ever dip below the £1000 mark.
Obviously if you're buying a car, making a large payment for something else or whatever, then yes, it may (but shouldn't) dip below that amount.

premierfella

I have a NatWest account with no overdraft. There is a constant nag on the internet baking telling me I'm likely to get approved for an overdraft of £x. This month x is half what it was last month, for no obvious reason.

My answer to the original question is yes, unless I needed the overdraft (I don't on NatWest as I'd rather keep a small float in there to cover the unexpected/forgotten than run it at zero and use an overdraft facility they charge a monthly fee for using).

If I'd NEVER seen a pre-approved overdraft offer on NatWest internet banking having banked with them since 2012 (and knowing that they show such offers for others), and have never used an unauthorised one with them, maybe the answer would be different (as it indicates that if I did actually need one I'd have to jump through hoops to get it).

Thrugelmir

moneysaver6161 wrote: »

It is only to be used as a safety net and not something I will ever use to be honest, but on principle should you stay with a Bank that would not give you an overdraft ?.

On a different tack. NatWest is part of the financially flailing RBS group. Overdrafts do cost banks money. It's not a free facility for them to maintain. So there's commercial reasoning behind their decision. It's not anything personal.

Jlawson118

I'm glad you've posted this because the same thing happened to me a few months ago with Halifax, and no, I didn't stay with them.

I needed to borrow just short of £1000 back in August and First Direct are my main bank, but they gave me a £1000 overdraft with no questions asked. Yet I was in the process of using Halifax for my main spending and everything and they wouldn't even give me a £300 overdraft. But they're owned by Lloyds and I also tried to get a £500 overdraft with them, I got it straight away..it was just Halifax playing hard to get so in the end I left them.

My argument for leaving them was that if I ever was in an emergency and needed to borrow some money and they were the only bank I was with, would I trust them in lending me the money or would they reject me? The overdraft rejection was enough for me so I did leave..
And my girlfriend is in the process of trying to sign up and they're being horrible to her

enthusiasticsaver

It would not bother me if my main bank did not offer me an overdraft but we do in fact have an authorised one anyway although we have never used it. As we bank in Santander 123 we tend to keep a high balance in it anyway for the savings interest so even if salary payments were late going in it would not be an issue. Maybe the high credit card limit is restricting them from offering you an overdraft.

teddysmum

It wouldn't bother me, as I've never wanted or needed an overdraft. What I couldn't afford, I did without. (eg tv for the first year of marriage, fridge for first two years, celebrating Christmas beyond small gifts for the children, one year)

TheBanker

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.

Can I give an example?

Last year I was at work as normal getting on with my business, when I received a phone call saying my dad, who was abroad on holiday, had suffered a heart attack and was seriously ill in hospital. His friend, who he was travelling with, suggested that I really ought to get there as quickly a possible.

While I had to make a few personal phone calls, my kind colleague phoned the company's travel agent to find out the best way of getting there. Because I had an overdraft the flight could be paid for straight away using my debit card and she also found me a hotel close to the hospital which she booked for a couple of nights. As it was all booked at short notice and the only suitable flight was with BA, this was quite expensive.

At the time I did not want the hassle of logging into various banks to move money around, I didn't have all the log in details, various cards and log-in devices at work and I didn't want to have to wait up to 2 hours for all the faster payments to arrive.

As my main current account does not pay interest I keep a relatively small balance to cover day to day spending and planned bills. There wasn't enough money to cover the costs of the flights and the hotel.

When I got home to pick up my passport and throw some clothes into a bag, I did make transfers to make sure I had access to all my savings (some to my main current account, the rest to a second current account where I have a debit card and mobile banking).

So in summary I used my overdraft for about 5 hours but having it allowed the flight to be paid for without issue, and allowed me to withdraw some cash to pay for taxis and food. It also meant that if there were internet problems overseas, I would not have to worry about checking my balance regularly and I would know all my regular bills would be paid. I ended up being abroad for 5 weeks so this was a big comfort.

In the end use of my overdraft cost £6 but meant I could concentrate on more important things. I suspect that given the travel agent charges a fee for paying by credit card, this was actually the cheapest way to do it as well.

So am I managing my finances poorly? I had planned for the need to have money available but had not planned for the need to book (effectively) a short holiday from work with no notice.

(Also worth pointing out that the overdraft was set up before Faster Payments were as common as they are now, and you could be waiting 2 - 5 days for a transfer from savings to be processed).

Anthorn

Thrugelmir wrote: »

On a different tack. NatWest is part of the financially flailing RBS group. Overdrafts do cost banks money. It's not a free facility for them to maintain. So there's commercial reasoning behind their decision. It's not anything personal.

It's the opposite that's true: Interest-bearing overdrafts make money for the banks.

Providing the money for overdrafts in retail banking is in fact free for the banks: Read up on how banks generate money. Grossly oversimplified, they know from stats how much cash they need to be available to cover their customers' withdrawals including spends. They lend out what's left and make a profit from it.

TheBanker

Anthorn wrote: »

Providing the money for overdrafts in retail banking is in fact free for the banks: Read up on how banks generate money. Grossly oversimplified, they know from stats how much cash they need to be available to cover their customers' withdrawals including spends. They lend out what's left and make a profit from it.

Strictly, an individual overdraft facility which is never used does have a marginal cost to the bank (underwriting costs to set it up, issuing of documentation). However you are right that this is all a gross simplification - you need to consider whether the product as a whole is profitable which is should be due to both interest and fees. Also consider whether it is a marketing tool which generates additional current account customers who then go on to buy other products.

takman

TheBanker wrote: »

Can I give an example?

Last year I was at work as normal getting on with my business, when I received a phone call saying my dad, who was abroad on holiday, had suffered a heart attack and was seriously ill in hospital. His friend, who he was travelling with, suggested that I really ought to get there as quickly a possible.

While I had to make a few personal phone calls, my kind colleague phoned the company's travel agent to find out the best way of getting there. Because I had an overdraft the flight could be paid for straight away using my debit card and she also found me a hotel close to the hospital which she booked for a couple of nights. As it was all booked at short notice and the only suitable flight was with BA, this was quite expensive.

At the time I did not want the hassle of logging into various banks to move money around, I didn't have all the log in details, various cards and log-in devices at work and I didn't want to have to wait up to 2 hours for all the faster payments to arrive.

As my main current account does not pay interest I keep a relatively small balance to cover day to day spending and planned bills. There wasn't enough money to cover the costs of the flights and the hotel.

When I got home to pick up my passport and throw some clothes into a bag, I did make transfers to make sure I had access to all my savings (some to my main current account, the rest to a second current account where I have a debit card and mobile banking).

So in summary I used my overdraft for about 5 hours but having it allowed the flight to be paid for without issue, and allowed me to withdraw some cash to pay for taxis and food. It also meant that if there were internet problems overseas, I would not have to worry about checking my balance regularly and I would know all my regular bills would be paid. I ended up being abroad for 5 weeks so this was a big comfort.

In the end use of my overdraft cost £6 but meant I could concentrate on more important things. I suspect that given the travel agent charges a fee for paying by credit card, this was actually the cheapest way to do it as well.

So am I managing my finances poorly? I had planned for the need to have money available but had not planned for the need to book (effectively) a short holiday from work with no notice.

(Also worth pointing out that the overdraft was set up before Faster Payments were as common as they are now, and you could be waiting 2 - 5 days for a transfer from savings to be processed).

But that all came down to what cards you had with you at work. I keep a couple of debit cards in my wallet and also my credit cards. So in that situation I would have simply been able to pay using my credit card. I've just looked on the BA website and the fees are £5 per booking so slightly less than your £6 overdraft fee and you also get section 75 protection. Plus the credit card I always carry is my Halifax Clarity so I can use it abroad and withdraw foreigh cash with no fees.

In your case your not managing your finances poorly but a Credit Card will always be a better way to quickly access money than an overdraft.