Increase in overdraft

T-G-C

sourcrates wrote: »

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).

Personally, I see credit as the devil in disguise. I still use it, however I am continuously learning how to better manage debt without getting in too deep, which admittedly I have already done before even turning 19 :rotfl: On the bright side, at-least I have learned this sooner in life than later. I would rather be 25 with a wealth of knowledge than only just learning the ropes of credit with a blank credit file. That being said, to this date, I have never had a single bad mark put on my credit file. My only worst enemy is high credit utilisation with all my lenders, which is the main problem I face at the moment, due to the shear temptation that credit can give you. Some people are completely deterred from the thought of borrowing, whereas others like me have embraced it, with potential dire consequences to yet potentially follow.

When you are as young as I am, it is hard to know what to avoid or how to avoid it, until you have learned the hard way. As I said above, I'd rather make all these mistakes now rather than later in life, preferably not at all, but that's easier said than done for sure.

Although credit is the devil in disguise, I do see a useful side to it. I feel something different when using a credit card, something you can't replicate on debit. Therefore once you've made those mistakes, you understand how credit works and organise your finances, you can have the upper hand on lenders and reap the good side of the devil, rather than the bad.

John_Jones

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.

That is a silly thing to write, as both are demonstrably untrue. You cannot assume that because you spent too much that everyone else will.

I use a credit card for most purchases, and pay it off in full each month. I use one for foreign travel, as I get effectively mid-market FX with no charges, and my Amex gets me air miles and companion vouchers.

Your hyperbole does not help anyone.

shortcrust

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.

Hear hear.

PixelPound

The problem is people live in their overdrafts and it just resets their zero. That is if they have a basic account they live to what they have in there, if you then allow an upgrade to have a £200 OD then that becomes the new "zero" i.e. use the money up to the limit but don't go over and each time they get paid it takes them temporarily back in the black though they'll go back into the overdraft.

If you are regularly in overdrafts, it does mean you are not managing finances effectively. I'm surprised on MSE people are saying that living in or dipping into OD regularly is fine. Yes, if people have money problems then using it to manage is better than other higher cost option, but long term use is not really great and debt advice should be promoted to those as freely available options to help them get out of the cycle.

You can generalise Credit Card usage, whilst many use them and never pay a penny in interest, doesn't mean they should be promoted without warnings since it's easy to not clear them and that become part of normal money management - a buffer for weeks when you are short, and that £5, £10, .. interest every month just becomes the acceptable part of having it.

sourcrates

John_Jones wrote: »

That is a silly thing to write, as both are demonstrably untrue. You cannot assume that because you spent too much that everyone else will.

It’s not an assumption.

In the first half of 2016, 313,679 people contacted stepchange for free debt advice by telephone or online, and there were over 1.7 million visits to there website.

This is 11% up on the first half of 2015, there next busiest period. On average there clients owed £13,826 in unsecured debt, spread over an average of 5/7 debts, mainly credit cards.