Santander reducing my overdraft limit

moneyaspie2024

I received an online letter in my online documents inbox today that Santander are going to reduce my overdraft from £2000 to £100 from 1st November. 

I rang Santander today and told them that my autism makes me vulnerable and sometimes I overspend, and while I don’t regularly use the overdraft and not usually in it by more than £70, it provides me with a safety blanket, such as if there is a payment delay with my wages or benefits, or I get sick from work and need to have the overdraft to manage short term. I am also trying to reduce my other debt by making more than minimum payments every month. 

The woman on the phone from the financial difficulties was brilliant and was very sympathetic to my situation and reviewed my account, she thought I managed it quite well and believed that the reduction in the overdraft limit was a result of the full amount not being used and nothing to do with the management of my account or my credit file, however she informed me that she would be unable to lodge an appeal with underwriting until the limit reduction has been applied. 

I understand that Santander has the right to do this, but I believe they have not taken my needs into consideration as an autistic person when making this decision and it has caused me great worry and distress, I have checked my credit files all showing healthy credit utilisation and no missed payments, and there is around 2.5k going through Santander account every month.

molerat

If you only ever use less than £100 of your overdraft why is having a £100 limit of so much concern ?

Banks have to hold reserves to cover their exposure.  That additional £1900 unused credit multiplied by several thousand customers adds up to a fair chunk of money needed to be held on immediate call but not being used. The same has happened to many with their credit card limits.  Your other debt could have come into play though - the bank won't want to expose themselves to you dipping into that £2k and not paying it back.  It could be said they are looking after your interests, far too many people get into debt and blame the bank for allowing it.

eskbanker

moneyaspie2024 said:

I rang Santander today and told them that my autism makes me vulnerable and sometimes I overspend, and while I don’t regularly use the overdraft and not usually in it by more than £70, it provides me with a safety blanket, such as if there is a payment delay with my wages or benefits, or I get sick from work and need to have the overdraft to manage short term. I am also trying to reduce my other debt by making more than minimum payments every month.

Sounds like a reduced overdraft facility may actually help with overspending - obviously if there are hardship problems arising from payment delays or sickness then that's different but they may be able and willing to help if/when such issues arose?

moneyaspie2024

molerat said:

If you only ever use less than £100 of your overdraft why is having a £100 limit of so much concern ?

Banks have to hold reserves to cover their exposure.  That additional £1900 unused credit multiplied by several thousand customers adds up to a fair chunk of money needed to be held on immediate call. The same has happened to many with their credit card limits.  It is nothing personal against you or your managing of the account.

Yes I get that but who knows if sometime down the line I’ll need to use more ect, life is unpredictable and overdrafts aren’t actually intended to be used upto their limits. 

People using credit card and overdraft correctly and well within their allowed limits are being savagely targeted at present by financial providers, and it could actually do that person more financial harm than good, credit utilisation increases when credit limits are arbitrary reduced and this is actually counterproductive, it could even push a person not previously in financial distress, into financial distress. 

Inbetweeners

moneyaspie2024 said:

molerat said:

If you only ever use less than £100 of your overdraft why is having a £100 limit of so much concern ?

Banks have to hold reserves to cover their exposure.  That additional £1900 unused credit multiplied by several thousand customers adds up to a fair chunk of money needed to be held on immediate call. The same has happened to many with their credit card limits.  It is nothing personal against you or your managing of the account.

Yes I get that but who knows if sometime down the line I’ll need to use more ect, life is unpredictable and overdrafts aren’t actually intended to be used upto their limits. 

People using credit card and overdraft correctly and well within their allowed limits are being savagely targeted at present by financial providers, and it could actually do that person more financial harm than good, credit utilisation increases when credit limits are arbitrary reduced and this is actually counterproductive, it could even push a person not previously in financial distress, into financial distress. 

I think most on this forum would disagree. Banks are not obliged to offer anyone a constant unused overdraft 'just in case'. As this is a 'moneysaving' site it's also worth pointing out an overdraft is one of the most expensive ways to borrow money and using an overdraft is not good for your credit file. Surely that is more likely to cause financial distress in future?

moneyaspie2024

eskbanker said:

moneyaspie2024 said:

I rang Santander today and told them that my autism makes me vulnerable and sometimes I overspend, and while I don’t regularly use the overdraft and not usually in it by more than £70, it provides me with a safety blanket, such as if there is a payment delay with my wages or benefits, or I get sick from work and need to have the overdraft to manage short term. I am also trying to reduce my other debt by making more than minimum payments every month.

Sounds like a reduced overdraft facility may actually help with overspending - obviously if there are hardship problems arising from payment delays or sickness then that's different but they may be able and willing to help if/when such issues arose?

People overspend but that dosent necessarily indicate financial mismanagement, things such as Christmas and stuff come up but people get back on track soon after, but the entire point of overdrafts is to be used for short term lending and people using them correctly are being penalised. If they reduced it to £1500 or £1000 I would have understood that, but the fact they have reduced it significantly I don’t understand.

moneyaspie2024

Inbetweeners said:

moneyaspie2024 said:

molerat said:

If you only ever use less than £100 of your overdraft why is having a £100 limit of so much concern ?

Banks have to hold reserves to cover their exposure.  That additional £1900 unused credit multiplied by several thousand customers adds up to a fair chunk of money needed to be held on immediate call. The same has happened to many with their credit card limits.  It is nothing personal against you or your managing of the account.

Yes I get that but who knows if sometime down the line I’ll need to use more ect, life is unpredictable and overdrafts aren’t actually intended to be used upto their limits. 

People using credit card and overdraft correctly and well within their allowed limits are being savagely targeted at present by financial providers, and it could actually do that person more financial harm than good, credit utilisation increases when credit limits are arbitrary reduced and this is actually counterproductive, it could even push a person not previously in financial distress, into financial distress. 

I think most on this forum would disagree. Banks are not obliged to offer anyone a constant unused overdraft 'just in case'. As this is a 'moneysaving' site it's also worth pointing out an overdraft is one of the most expensive ways to borrow money and using an overdraft is not good for your credit file. Surely that is more likely to cause financial distress in future?

Overdrafts don’t get reported on your credit file unless you are in it the day the bank updates the CRA feed, only the limit itself shows. 

moneyaspie2024

molerat It could be said they are looking after your interests, far too many people get into debt and blame the bank for allowing it.

I get your point, but I also believe that people shouldn’t be punished for the actions of another, that just creates a culture of distrust. 

Anyway they have gave me nearly 60 days notice, if it was due to financial difficulties they would have removed it immediately so I’m not worried about that part. 

moneyaspie2024

Inbetweeners said:

moneyaspie2024 said:

molerat said:

If you only ever use less than £100 of your overdraft why is having a £100 limit of so much concern ?

Banks have to hold reserves to cover their exposure.  That additional £1900 unused credit multiplied by several thousand customers adds up to a fair chunk of money needed to be held on immediate call. The same has happened to many with their credit card limits.  It is nothing personal against you or your managing of the account.

Yes I get that but who knows if sometime down the line I’ll need to use more ect, life is unpredictable and overdrafts aren’t actually intended to be used upto their limits. 

People using credit card and overdraft correctly and well within their allowed limits are being savagely targeted at present by financial providers, and it could actually do that person more financial harm than good, credit utilisation increases when credit limits are arbitrary reduced and this is actually counterproductive, it could even push a person not previously in financial distress, into financial distress. 

I think most on this forum would disagree. Banks are not obliged to offer anyone a constant unused overdraft 'just in case'. As this is a 'moneysaving' site it's also worth pointing out an overdraft is one of the most expensive ways to borrow money and using an overdraft is not good for your credit file. Surely that is more likely to cause financial distress in future?

I also had a situation on my Halifax world elite card a few weeks ago where they reduced my credit limit from £3000 to £500, however after submitting an appeal to the lending team they agreed to reinstate the limit, I’m hoping that I get the same outcome in this regard. 

Inbetweeners

moneyaspie2024 said:

eskbanker said:

moneyaspie2024 said:

I rang Santander today and told them that my autism makes me vulnerable and sometimes I overspend, and while I don’t regularly use the overdraft and not usually in it by more than £70, it provides me with a safety blanket, such as if there is a payment delay with my wages or benefits, or I get sick from work and need to have the overdraft to manage short term. I am also trying to reduce my other debt by making more than minimum payments every month.

Sounds like a reduced overdraft facility may actually help with overspending - obviously if there are hardship problems arising from payment delays or sickness then that's different but they may be able and willing to help if/when such issues arose?

People overspend but that dosent necessarily indicate financial mismanagement, things such as Christmas and stuff come up but people get back on track soon after, but the entire point of overdrafts is to be used for short term lending and people using them correctly are being penalised. If they reduced it to £1500 or £1000 I would have understood that, but the fact they have reduced it significantly I don’t understand.

What's difficult to understand? You don't even need a £1000 if you only occasionally use £70ish.

Anyways from your other replies, it seems no matter what others say you will feel unfairly treated.

Nasqueron

moneyaspie2024 said:

molerat said:

If you only ever use less than £100 of your overdraft why is having a £100 limit of so much concern ?

Banks have to hold reserves to cover their exposure.  That additional £1900 unused credit multiplied by several thousand customers adds up to a fair chunk of money needed to be held on immediate call. The same has happened to many with their credit card limits.  It is nothing personal against you or your managing of the account.

Yes I get that but who knows if sometime down the line I’ll need to use more ect, life is unpredictable and overdrafts aren’t actually intended to be used upto their limits. 

People using credit card and overdraft correctly and well within their allowed limits are being savagely targeted at present by financial providers, and it could actually do that person more financial harm than good, credit utilisation increases when credit limits are arbitrary reduced and this is actually counterproductive, it could even push a person not previously in financial distress, into financial distress. 

This is largely incorrect. Using a credit card correctly is not the same as an overdraft - with the former, you spend, then pay off in full every month, pay no interest, with the latter you are taking out a loan in essence and frequently have charges or interest associated with it. 

People using credit correctly are not being savagely targeted - you have a £2000 limit but use less than 1/20th of it, so they're removing the unnecessary amount. Allowing you to run up unaffordable debt is not good practice.

Credit utilisation is a nonsense metric invented by the CRAs, managing your credit and income is what matters

If not being able to run up expensive short term debt like an OD would cause you problems, then your situation is the problem - too much spending and not enough income. Having a load of debt on top paying interest is not a good idea.