Fixed daily and monthly overdraft fees to be banned - MSE News

worried_jim

Tom99 wrote: »

Years ago I used to work for a bank and if you went a penny overdrawn you were called before a senior manage to explain yourself.

I work for a bank and listening to my colleagues discussing their own overdrawn accounts surprises me that they can sleep at night.

Takmon

colsten wrote: »

Congratulations for having been fortunate enough to always have enough money! Whilst I fully agree that management of your outgoings is crucial, and that going overdrawn should be avoided at all cost, it's totally ridiculous to suggest that needing an overdraft is a sign of poor financial management. In fact, I would suggest it is prudent financial management to have an overdraft facility, even if it sits there unused all the time. That is especially true when you can get hit with high unauthorised overdraft charges, as we can at the moment.

If you keep track of when payments are being made and when you have incoming payments then you never need an overdraft.
If you manage your fiances properly you will never need to use more money from an account than is in there.

Overdraft are a poor and usually expensive way to borrow money so using one is not good financial management.

colsten wrote: »

To give you an example: I have a few Regular Saver accounts which must be fed by SO from a current account with the same bank the RS is with. I am not using those current accounts for any other purpose than feeding the respective RS, and there is generally a balance of zero as they pay no interest. The money for the RS arrives, by SO, from my 'main' current account into the respective current account the RS is fed from, in time for the transfer to the RS if all works as planned. However, things (outside my control) might not work as planned, for a variety of reasons. Therefore I have agreed overdrafts on those current accounts, to the amount required for the respective RS. I have never needed to use any of those overdrafts but they are there should they be needed. If they were ever needed, I would settle them within a day or two.

I have all my standing orders coming out of one account which my wages go into. I know the expected balance after these have been taken so with one quick look i can see if all standing orders have been paid out. I've never had any overdraft on any of my current accounts and have never had an issue.

colsten wrote: »

There are plenty of other examples why people have arranged overdrafts, and some good reasons why some may occasionally have to dip into their overdrafts. Once the charges will be the same for arranged and for unarranged overdrafts will be the same, there may obviously be less, or no, need for having an arranged overdraft facility.

There are also 'good' reasons why some people constantly need to dip into their overdrafts, just as some people are forced at times to use food banks.

Finally, you are actually benefiting from people paying overdraft charges, as those charges contribute to the cost of making a free-of-charge bank account available to you.

I also remember that at least one consumer website, which shall remain nameless , hailed the arrival of fixed fees, in place of %age charges. How long before we hear cries again that %ages are too hard to work out?

I can't think of any good reason to need to use an overdraft at all. There are much better ways to borrow money if needed such as using a credit card which will be interest free if paid off by the next statement.

Yes i know paying the fees of overdraft supports the high interest and rewards i get on my accounts. But i still would never encourage anyone to make poor financial choices just so the fees keep getting paid.

The problem with having overdrafts "just in case" is that they can add up to quite a lot which shows up as available credit on your credit reports. This would then mean when applying for useful credit such as credit cards you are more likely to be offered a lower limit due to all your available credit.
This has a much bigger effect the lower the persons wages. So the low earners who might benefit the most from decent credit cards will get a much lower limit if they have overdrafts.

Kentish_Dave

These fees served a useful purpose in that hitting people with fees for dipping in reminder them that debt costs money and should not be taken on absent-mindedly.

Regularly using an overdraft is generally a real red flag.

JuicyJesus

worried_jim wrote: »

I work for a bank and listening to my colleagues discussing their own overdrawn accounts surprises me that they can sleep at night.

Bank workers are still workers, they're subject to the same financial pressures and habits as anyone else.

Not very well paid, either.

bristolleedsfan

colsten wrote: »

.

To give you an example: I have a few Regular Saver accounts which must be fed by SO from a current account with the same bank the RS is with. I am not using those current accounts for any other purpose than feeding the respective RS, and there is generally a balance of zero as they pay no interest. The money for the RS arrives, by SO, from my 'main' current account into the respective current account the RS is fed from, in time for the transfer to the RS if all works as planned. However, things (outside my control) might not work as planned, for a variety of reasons. Therefore I have agreed overdrafts on those current accounts, to the amount required for the respective RS. I have never needed to use any of those overdrafts but they are there should they be needed. If they were ever needed, I would settle them within a day or two.

I have all the regular savers as well, never have overdraft on my C/A(s), if things dont go to plan now get notified to credit an account by a time several hours later in the day.


As for the general conversation about those who cannot manage their lives/financial affairs properly if they use an overdraft facility whether authorised or unauthorised. I like many was brought up dont have what cant afford, if not got the money dont have it, "live within your means". :T

Blackbeard_of_Perranporth

is it now time to bring back bank charges for those that dip below say £500 in their account?

Consumerist

Thank heavens the banks' monstrous charging structure is finally being drawn to a close. I don't accept the argument that "interest" rates are too difficult to understand - particularly if the banks are being made to provide calculators to do the job anyway.

For those of us who don't have or use overdrafts it is likely our banking costs will increase in the form of transaction charges and/or annual account fees but at least the replacement charging structure will be fairer.

Zero_Sum

The banks have been scaling back the perks over last few months
Ie Tesco reducing rate from 3% to 1%
Nationwide scrapping 5% RS
Santander reducing their RS from 5% to 3%
Halifax dropping their reward from £3 to £2 (or should that be £3.75 to £2.50?)

So im guessing they probably knew it was coming in & the above cuts are paying for it

Zero_Sum

colsten wrote: »

Congratulations for having been fortunate enough to always have enough money! Whilst I fully agree that management of your outgoings is crucial, and that going overdrawn should be avoided at all cost, it's totally ridiculous to suggest that needing an overdraft is a sign of poor financial management. In fact, I would suggest it is prudent financial management to have an overdraft facility, even if it sits there unused all the time. That is especially true when you can get hit with high unauthorised overdraft charges, as we can at the moment.

I agree its prudent to have the facility there as an absolute last resort, but pretty much everyone I know who are constantly skint are all big spenders (or gamblers). And if theyre absolutely honest with themselves, theyd admit to using overdraft due to living beyond their means.

One-Eye

JuicyJesus wrote: »

The absurdly complex fee structure that some have is ridiculous (7p per day per £100 or something, that's a nightmare to work out...)

colsten wrote: »

I also remember that at least one consumer website, which shall remain nameless , hailed the arrival of fixed fees, in place of %age charges. How long before we hear cries again that %ages are too hard to work out?

Which is easier to work out?
7p per day per £100
25.55% APR
29.1% EAR