Overdraft called in - how does it work?

Sea_Shell

I am aware that bank overdrafts can be "called in" (pulled) at any time, so it is dangerous (and expensive) to rely on them, month in month out.

What does this actually mean in reality and under what circumstances would a bank usually take this measure?  (Barclays, specifically)

Do they give you any notice, and do they then just default/decline every payment (DD) that is due to come from the account, once pulled?  

What happens when your salary goes in, if you are already in overdraft.    

eg, you go £2000 into overdraft each month, and then salary of £2500 goes in, do they take the £2000, then cut off any new credit, leaving you with suddenly only £500 to live on, and DDs due?   

Any real life experiences as to what happens, and how common that tactic is?

Thanks



(I have a sibling who lives in their overdraft, and I'm worried about their finances generally.  They have already consolidated a couple of times! )

Grumpelstiltskin

The best thing you could do is to try and persuade your sibling to face up to their problem and come on here for advice.
What would you do if the bank suddenly withdrew their overdraft and they came to you pleading poverty? Would you give them money? No use saying you would lend them money as you wouldn't get it back.

DullGreyGuy

They will typically give you 30 days notice before the reduction takes effect.

Its been a long time since I've been into overdrafts etc, certainly back in the day what happened somewhat depended on your banks position on unauthorised overdrafts, some allowed them to some extent and so payments would still go but you'd be hit with fees others would refuse the payment. These days more seem to fall into the later but dont know if thats due to changes in regulations or just the lower fees on these things these days etc. 

Certainly with credit cards they have to walk the limit down, they cannot slash the limit below your current balance but may give you much less than 30 days notice. 

If you believe there is a material chance of negative actions being taken then it would seem prudent. to have your salary changed to be paid into another account held with an unrelated bank

sourcrates

Best way to get out of overdraft abuse is to get yourself a new basic bank account, with no borrowing facility, manually transfer all your payments etc over to it, do a workable budget, and stick to it.

Your old overdraft just becomes another non essential debt to service.

Its so simple, you just have to take back control, there should be no reason why an individual would continue with such self destructive behaviour.

Sea_Shell

I don't have the full picture, as they haven't shared everything with me, but I don't think they are ready to go "debt free" yet, as they don't seem to have had a true lightbulb moment.   

So defaulting and living to a strict budget is not on the cards...yet.   Sadly, they are in the denial phase.   But, I fear that that point will come and soon.

I just wanted to know which "wheel" is likely to fall off first.    Having their OD pulled, or being refused any additional credit, etc.   

Sadly, they will likely be offered more and more credit, before they reach that point, which could prove too tempting. 

sourcrates

Sea_Shell said:

I don't have the full picture, as they haven't shared everything with me, but I don't think they are ready to go "debt free" yet, as they don't seem to have had a true lightbulb moment.   

So defaulting and living to a strict budget is not on the cards...yet.   Sadly, they are in the denial phase.   But, I fear that that point will come and soon.

I just wanted to know which "wheel" is likely to fall off first.    Having their OD pulled, or being refused any additional credit, etc.   

Sadly, they will likely be offered more and more credit, before they reach that point, which could prove too tempting. 

As mentioned above, banks tend to give 30 days notice to call in an overdraft, but it can take a while for them to act, its a bit of a fallacy to assume banks act quickly in these situations, most of the time they don`t, and a  lot of charges can be racked up before action is finally taken.

It does depend on the bank though, online only banks tend to act quicker as they are mostly automated with little human involvement, wear as Barclays for example, may not act as quickly.

But the point will be reached when no further credit is available, and the buck will eventually stop.

Sea_Shell

Grumpelstiltskin said:

The best thing you could do is to try and persuade your sibling to face up to their problem and come on here for advice.
What would you do if the bank suddenly withdrew their overdraft and they came to you pleading poverty? Would you give them money? No use saying you would lend them money as you wouldn't get it back.

Yes, there is every chance they would ask for (or expect 😲) help.  But possibly not quite so directly.  It would have to be a gift, as you say, as no prospect of ever being paid back.

Trouble is, they wouldn't just need a couple of grand to tide them over. ☹️ 

They have already had significant sums gifted from the Bank of Mum and Dad, (which is ongoing 😲.)

horsewithnoname

Sea_Shell said:

 Grumpelstiltskin said:

The best thing you could do is to try and persuade your sibling to face up to their problem and come on here for advice.
What would you do if the bank suddenly withdrew their overdraft and they came to you pleading poverty? Would you give them money? No use saying you would lend them money as you wouldn't get it back.

Yes, there is every chance they would ask for (or expect 😲) help.  But possibly not quite so directly.  It would have to be a gift, as you say, as no prospect of ever being paid back.

Trouble is, they wouldn't just need a couple of grand to tide them over. ☹️ 

They have already had significant sums gifted from the Bank of Mum and Dad, (which is ongoing 😲.)

The best help you could give them is the address of this website. If you give them money they’ll just want more. They need to get out of the habit of sponging of others and sort themselves out. 

I speak as someone with a sibling who I love very much, and would help whenever needed, but you wouldn’t help them by giving them money, you’d just prolong the inevitable. 

Sea_Shell

horsewithnoname said:

Sea_Shell said:

 Grumpelstiltskin said:

The best thing you could do is to try and persuade your sibling to face up to their problem and come on here for advice.
What would you do if the bank suddenly withdrew their overdraft and they came to you pleading poverty? Would you give them money? No use saying you would lend them money as you wouldn't get it back.

Yes, there is every chance they would ask for (or expect 😲) help.  But possibly not quite so directly.  It would have to be a gift, as you say, as no prospect of ever being paid back.

Trouble is, they wouldn't just need a couple of grand to tide them over. ☹️ 

They have already had significant sums gifted from the Bank of Mum and Dad, (which is ongoing 😲.)

The best help you could give them is the address of this website. If you give them money they’ll just want more. They need to get out of the habit of sponging of others and sort themselves out. 

I speak as someone with a sibling who I love very much, and would help whenever needed, but you wouldn’t help them by giving them money, you’d just prolong the inevitable. 

I have already given them links to the SOA calculator, and have offered to help them get everything down on paper.   And yes, I will direct them here, if things get any worse, but would rather they not know that I am a regular on here. 

I'll know them if I see them though!!

I don't plan on giving (or lending) them any money, but the pressure could be huge to DO something.

But what else can I practically do, besides ultimately offering to house and feed them?!!  (which I won't be, as they have (are) a large family!!) 

  

enthusiasticsaver

All you can really do is offer constructive advice and help.  As you are a good budgeter yourself and a regular on here I am sure you do not need reminding that lending them money is throwing good money after bad especially if they have not had their LBM.  

In my experience things have to be quite bad before banks call in overdrafts so I would expect that this would not happen imminently. Unfortunately the old saying holds true in that you can lead a horse to water but cannot make it drink.  If they insist on burying their  head in the sand the situation will only get worse. I hope they address the problem soon. 

Sea_Shell

enthusiasticsaver said:

All you can really do is offer constructive advice and help.  As you are a good budgeter yourself and a regular on here I am sure you do not need reminding that lending them money is throwing good money after bad especially if they have not had their LBM.  

In my experience things have to be quite bad before banks call in overdrafts so I would expect that this would not happen imminently. Unfortunately the old saying holds true in that you can lead a horse to water but cannot make it drink.  If they insist on burying their  head in the sand the situation will only get worse. I hope they address the problem soon. 

Thanks.  I hope so too.    I really don't think they are ready to face up to the hard budgeting lessons required, yet. 

Whenever I've mentioned it, I get the "It's OK for you" vibe.    My DH tells me to stay out of it and let them get on with it.

I get the impression they'd rather sell a kidney than give up their full Sky package.

I just worry that I will end up being "the bad guy" in all this, if I don't just write them a cheque for £50,000, as "isn't that what families do for each other".