Increase in overdraft

M90man

My bank has just offered me an increased arranged overdraft limit

Thy have raised it from just under £3k to £5k!! Although I very rarely even go into it (except in emergencies)

Now I appreciate thy are VERY expensive but is it a good idea to take the increase offered for those “emergency” purchases ?

I’ve just moved and bought a new property so won’t be going anywhere for the forseable future (years) but will it harm/hinder my credit rating ?

Cheers
:j

Candyapple

M90man wrote: »

My bank has just offered me an increased arranged overdraft limit

Thy have raised it from just under £3k to £5k!! Although I very rarely even go into it (except in emergencies)

Now I appreciate thy are VERY expensive but is it a good idea to take the increase offered for those !!!8220;emergency!!!8221; purchases ?

I!!!8217;ve just moved and bought a new property so won!!!8217;t be going anywhere for the forseable future (years) but will it harm/hinder my credit rating ?

Cheers
:j

Not really, that's what a credit card is for.

Personally I would decline the increase. In fact, I'd go as far as saying remove the OD altogether. I used to live out of my overdraft for many years and was in a lot of debt. When I became debt free I got rid of all my overdrafts and 10 years later still don't need one and have never missed it.

Any "emergencies" that happen - I have already budgeted for. And in worst case scenario, I have savings and if that isn't enough, I have several credit cards which would tide me over. Really and truly what people call emergencies are things that should be budgeted for - e.g. Christmas presents, boiler broken, car broken down/repairs, dental work etc.

With regards to it affecting your credit history - probably won't impact it much however if you were planning on purchasing some new house items and needed a new 0% purchases card, the £5k OD would be one of many factors taken into consideration with regards to affordability and your potential credit limit.

M90man

Thanks very much for the reply.

binaryuniverse

I'd decline the increase, but certainly wouldn't lose the overdraft entirely. If you're not using it it shows you are responsible with credit, which is looked favourably upon. Losing it also reduces your credit availability hugely, which could hamper your ability get new credit in the future.

Keep it. Don't use it.

sourcrates

M90man wrote: »

My bank has just offered me an increased arranged overdraft limit

Thy have raised it from just under £3k to £5k!! Although I very rarely even go into it (except in emergencies)

Now I appreciate thy are VERY expensive but is it a good idea to take the increase offered for those “emergency” purchases ?

Cheers
:j

Candyapple wrote: »

Not really, that's what a credit card is for.

Personally I would decline the increase. In fact, I'd go as far as saying remove the OD altogether..

An overdraft only benefits the bank, in the same vein, a credit card just gets you into unimaginable debt.

Avoid both like the plague.

[Deleted User]

sourcrates wrote: »

An overdraft only benefits the bank, in the same vein, a credit card just gets you into unimaginable debt.

Avoid both like the plague.

Not true. I'm disappointed a board guide would post such rubbish.

It might be true for you, if you couldn't manage your own finances, but plenty of people use overdrafts and credit cards to their advantage.

Silvertabby

An overdraft only benefits the bank, in the same vein, a credit card just gets you into unimaginable debt.

Avoid both like the plague.
Originally posted by sourcrates

camelot1971 wrote: »

Not true. I'm disappointed a board guide would post such rubbish.

It might be true for you, if you couldn't manage your own finances, but plenty of people use overdrafts and credit cards to their advantage.

Exactly. We have an agreed overdraft which we have never used - but it's there for emergencies. We also have 2 cash back credit cards that we use for virtually all of our shopping. The cash back isn't as much as it was, but paying by credit card for the extra security that gives is a no-brainer. Obviously, we pay off the total bills in full every month.

Ben8282

Actually I would accept the increase but not use it.
Its true that the overdraft tis there for emergencies but more importantly a high overdraft limit which is NEVER used will give added confidence to lenders that direct debits will always be met etc
If you choose not to accept the increase absolutely do not reduce or get rid of the current facility..

MABLE

My overdraft facilities total about £10k. However only use very occasionally and that is when I am transferring money around and I ensure the facility is repaid by end of day to avoid any fees or charges. Also its shows the bank I am making use of the facility and that way less chance of them withdrawing it.

System

M90man wrote: »

My bank has just offered me an increased arranged overdraft limit

Thy have raised it from just under £3k to £5k!! Although I very rarely even go into it (except in emergencies)

Now I appreciate thy are VERY expensive but is it a good idea to take the increase offered for those “emergency” purchases ?

No, just no. You shouldn't need to be going into overdraft for emergency purchases especially ones which you know aren't emergencies as your quotations imply. That is what an emergency fund is for so build one of those up rather than thinking you're going to use the overdraft to fund an expensive purchase of something you can live without.

sourcrates

camelot1971 wrote: »

Not true. I'm disappointed a board guide would post such rubbish.

It might be true for you, if you couldn't manage your own finances, but plenty of people use overdrafts and credit cards to their advantage.

Silvertabby wrote: »

Exactly. We have an agreed overdraft which we have never used - but it's there for emergencies. We also have 2 cash back credit cards that we use for virtually all of our shopping. The cash back isn't as much as it was, but paying by credit card for the extra security that gives is a no-brainer. Obviously, we pay off the total bills in full every month.

My apologies, this is why I normally avoid making sweeping statements about things, as they can be mis-understood, please allow me to elaborate.


The biggest cause of debt problems today in the UK, are overdrafts, and their associated fee`s, they are meant to be short-term borrowing solutions, but evidence shows that they can all too easily trap people in expensive and long-term cycles of persistent debt, (look how many people post in DFW about OD debt) this applies especially when you go into an unauthorised OD. (source stepchange data 2016)


For emergencies, you should have an emergency fund saved up, not be reliant on an overdraught.

As for a credit card, some people need them, or use them, for various things, and they can mange credit cards well, and that`s fine, no problem, but many more cannot, very few of us have only one card either, lots have 5/6/7 or more accounts with different lenders, and use them all the time, very soon you are living off those cards, which again leads to long term debt problems. (source stepchange data 2016)


I do not use credit at all, I have no need to use credit, I live within my means, and pay everything from my bank account, obviously I have not always done so, and yes, I have been very stupid with credit in the past, there are always exceptions, but by an large, most people should avoid overdraughts and credit cards as they are the well worn pathways to long term debt problems. (source stepchange data 2016).