How to overdrafts work?

no_cool_name

It's not just the simple explanation I'm looking for, but more an idea of how an when a Bank would decide to increase an overdraft facility.

natweststaffmember

Banks increase overdrafts in two ways: 1) automatically or 2) customer request.

no_cool_name

What process is used to trigger an automatic increase?

bargains83

I have never recieved an automatic increase/decrease, but usually ask my back to increase it by £150 - £200 every 3 months and they have never said 'NO'.

I can't see any reasonable way for a bank to be able to offer automatic increases as if you have maxed out an existing overdraft then it would be foolish for them to extend it as you are already stretching your finances. Likewise if you never use it then why would you need one?.

A bank would likely offer you an increase at your request, if they see you are crediting regularly to your account and aren't in the red consistantly with your existing overdraft.

MarkyMarkD

I think you're right, bargains. Banks would be seen as irresponsibly lending if they approached people already in difficulty and randomly offered them increases in overdraft limit. And they would seem silly if they offered it to people who were never overdrawn.The only time you are likely to get offered an overdraft limit without asking is upon opening a new account, and at that stage it's sensible because they will be credit-scoring you.

C_Ronaldo

I know my bank increased my od and that was when money was going in and out

choccyface2006

Natwest are always writing to tell me they have increased my overdarft, my current account now has a limit of £1600. The only time I ever used it was when I needed to pay 6 months rent & a deposit in advance and even then I repaid it within a month so I have not been overdrawn by a penny for 4 years.

Sarah

Homework

2 or 3 times a year when I went into the branch the Abbey asked me if I would like to increase my overdraft as the system indicated I could. Each year they then sent a letter saying it had been extended.

Then out of the blue, a letter saying it was being withdrawn in one month. We phoned as we were too far into it to get out in a month. They agreed to have £200 a month paid to it to clear it. 3 months after making the agreement we were due to make the 3rd payment and got a letter from a Debt Collection Agency it had been passed to. Phoned Abbey who could do nothing as it had been passed on to an agency - phoned the agency who could do nothing as it had been passed to them. We then had to agree to pay the agency £200 a month and lost our account. Losing the account meant we had lost some of our money (which technically was in the overdraft but was what we were living on) and as our direct debits were cancelled they all became payable in full and we had no account to get wages paid into and no money to pay things in full.

And the rest is history, now on debt management plan.

Don't blame Abbey for anything up to the point they sent to debt agency, without warning, when we were meeting our agreement with them. Went into the branch sometime after and staff commented they had not seen me for a while and I told them what had happened. They said I should have come into the branch and they could have phoned.

I didn't need the overdraft at the time but always thought it might be handy, which it was, but when things are better I will create my own buffer on the account and not be indebted to a banking system who cannot give you the same answer twice.