HSBC reducing overdraft

[Deleted User]

Had a letter from HSBC that they are reducing my overdraft. I guess all the banks are going to start doing this now? I am waiting to see if my credit card limit is also reduced!

[Deleted User]

No, not all banks. And not to all customers.

[Deleted User]

Banks have been required to consider responsible lending for some time now, including things like persistent debt. If you are regularly using your OD it implies you are living beyond your means (this isn't a judgement, just a statement of fact that a computer somewhere thinks you spend more than you have available) so they may well want to lessen the amount of charges/interest you could pay by lowering the limit. Certainly some people have had credit limits reduced too, but it's certainly not everyone, plenty of people have increased limits or got more credit just fine.

[Deleted User]

Curiously I never use the overdraft for a year or so beyond a couple of hundred but the overdraft is thousands.

and ironically RBS keep emailing me asking if I need help to stop using my overdraft, but at the same time the app offered me to triple it which I did!

Thrugelmir

Deleted_User said:

Curiously I never use the overdraft for a year or so beyond a couple of hundred but the overdraft is thousands.

If you don't use your overdraft fully what's the issue in having the limit reduced?  At a macro level provision of overdraft facilities comes at a cost to the bank. There's a commercial logic to purging those that are unused. 

MoJoeGo

Well the obvious targets foe limit reductions are the customers at either end of the scale - the ones that are continuously at their limits and therefore in a form of persistent debt; and the ones that have a limit but never use it.

The former group are a pressing risk to the bank in terms of potential default (not to mention subsequent claims of irresponsible lending). The latter group are just an easy way of reducing the bank's theoretical maximum risk exposure, with hopefully the minimum level of fuss.

[Deleted User]

Thrugelmir said:

Deleted_User said:

Curiously I never use the overdraft for a year or so beyond a couple of hundred but the overdraft is thousands.

If you don't use your overdraft fully what's the issue in having the limit reduced?  At a macro level provision of overdraft facilities comes at a cost to the bank. There's a commercial logic to purging those that are unused. 

Never said there was an issue. Just that it had occurred. 

born_again

Deleted_User said:

Had a letter from HSBC that they are reducing my overdraft. I guess all the banks are going to start doing this now? I am waiting to see if my credit card limit is also reduced!

Given the interest rates on overdrafts. That is good news. 
Even better would be to get them to put it to zero. Then if you do go over.
The monthly cap on unarranged overdraft interest for your account is £20

VeganBart

I've just had a letter from them reducing my overdraft from 1000 to 250

I have a very good credit score and hardly ever use the overdraft and it's only been for a few days when I have, also never been anywhere near the 1000 limit.

I like having the overdraft in case of emergencies isn't that exactly what an overdraft is for?

Can't get anyone to listen to me when I phone them so will be switching the account to a bank that values my custom.

PRAISETHESUN

VeganBart said:

I've just had a letter from them reducing my overdraft from 1000 to 250

I have a very good credit score and hardly ever use the overdraft and it's only been for a few days when I have, also never been anywhere near the 1000 limit.

I like having the overdraft in case of emergencies isn't that exactly what an overdraft is for?

Can't get anyone to listen to me when I phone them so will be switching the account to a bank that values my custom.

That will be the reason why - having an available overdraft is risky for the bank, and also costs them money. By all means ask if they will reinstate it, and if it's important for you to have an OD and they won't offer one then please do feel free to vote with your feet.

One small note though is to ignore your credit score/rating. Lenders don't see this number so it's nothing more than a marketing gimmick created by the CRAs. The actual thing you need to focus on is the underlying data - staying within your limits, paying bills on time, etc. As long as you do this then you are demonstrating good credit history, which is what lenders actually look for.

eskbanker

VeganBart said:

I've just had a letter from them reducing my overdraft from 1000 to 250

I have a very good credit score and hardly ever use the overdraft and it's only been for a few days when I have, also never been anywhere near the 1000 limit.

I like having the overdraft in case of emergencies isn't that exactly what an overdraft is for?

Can't get anyone to listen to me when I phone them so will be switching the account to a bank that values my custom.

No harm in switching if there are incentives you're interested in, or if there are other reasons why you're unhappy with HSBC, but don't be under any illusion that a new bank would necessarily (a) offer a similar overdraft to a new customer and (b) do anything differently from HSBC if it isn't used much, or even 'value your custom' if that's how you choose to perceive this!