Should you always accept the maximum overdraft limit?

enthusiasticsaver

I never accept overdraft limits and have a high credit score. They are never free, or if they are they are only for a limited time usually. Why take them out.

takman

pochisoldi wrote: »

You need to do a risk assessment, implement mitigation and then repeat.

1st iteration:
Pay little attention to your finances.
Consequences: £8 per item fee,
Frequency: 6 times a year
Annual impact/cost: £48

2nd iteration
Pay more attention to finances
Consequences: £8 per item fee,
Frequency: once every 4 years
Annual impact/cost: £2

3rd iteration
Pay more attention to finances, and obtain free overdraft, which you never use.
Consequences: £8 per item fee
Frequency: Never
Annual impact/cost: £0

Any system which relies on human monitoring and/or intervention is bound to fail sooner or later.

But i have never had a missed direct debit or bank charge in my life and I've never had an overdraft, so an overdraft isn't a requirement to completely avoid any charges.

pochisoldi wrote: »

PochiSoldi
p.s. for me, a current account paying 5% has more value as a savings account...

If you have a current account paying 5% interest then you can also use this as a bills account it will give you a £2500 buffer and standing orders to transfer money in/out as required when bills/wages are paid will mean you have the benefit of the buffer while maximising the interest on your savings.

JuicyJesus

A big overdraft limit can come in handy. If I'd not taken the largest overdraft limit possible on my accounts right now, we'd be screwed and missing rent payments (partner is a freelancer and is awaiting payment). Cash flow is pretty much their entire intended purpose, after all.

You can say that people shouldn't use them but they are actually useful situationally.

Wheres_My_Cashback

JuicyJesus wrote: »

A big overdraft limit can come in handy. If I'd not taken the largest overdraft limit possible on my accounts right now, we'd be screwed and missing rent payments (partner is a freelancer and is awaiting payment). Cash flow is pretty much their entire intended purpose, after all.

You can say that people shouldn't use them but they are actually useful situationally.

You could say the same about credit cards, but used wisely both are a valuable asset to have in place should the need arise.

After all, debt can be good or bad depending on how it's managed.

alandaniel132

Even if it never shows as being used the bank your with will still have a record of you using it (which could be looked at if you ever apply for credit with them) and also it will still be a negative and possibly reduce any future credit card limits by having available credit.[/QUOTE]

agreed with this statement. Maximum overdraft will leave a record in credit history, lender will be able to see in future.

takman

enthusiasticsaver wrote: »

I never accept overdraft limits and have a high credit score. They are never free, or if they are they are only for a limited time usually. Why take them out.

I hope your not suggesting credit scores are a useful measure :O, an experienced poster and board guide like you should know better.