Bank reducing overdraft by nearly two thirds...

[womaninatightspot]

I have a 2k overdraft for years roughly about 2.3K goes in/out myaccount monthly. I had an online letter saying they are reducing it massively to £740 which is a random amount. I often am in the red by about 3-400 at the end of the month. Rarely over 1k unless I've had a big bill and it's short term for a week or so.

I'm having to do some house repairs so emptied my savings account recently would that of caused it (only 1K). Or is it general trend to reduce credit to people who don't use it or they think are at risk of overspending? I'm generally good at paying off cc at end of month. I did a credit check on the online bank app and it was apparently excellent at 677 out of 725 or 750 (can't remember which).

I'm actually quite annoyed, I know I don't generally use it but it felt like a good safety net. I have a cc with the same bank with a limit of 4k of which I normally use up to 1k a month then pay it off before I have to pay interest. I'm worried that will also reduce and then I will have less of a safety net and my credit rating will worsen due to higher utilisation of available credit. Then if I do find myself in a hole all my options will be much more expensive.

Is anyone else in this scenario? Have they successfully asked the bank to keep the facility or reduce it less drastically?

Is this Barclays by any chance?

Bank of Scotland

Ah ok. I’ve had the same with Barclays and managed to sort it. You can usually appeal these decisions so may be worth contacting them to ask them to reconsider

Speak to them, I’m with bank of Scotland, and mines not been touched.

I think banks are getting a lot more strict about credit. When I logged onto my banking app with Starling this morning there was a message about them now having to have more information on what my usual activity looks like so I had to answer a few questions about my salary and when it’s paid etc.

Overdrafts are an expensive way to utilise credit and I expect they have reduced it as you seem to be using it a lot and not necessarily in the way it was intended.

In the letter it says:

If you'd like us to reconsider this
decision you can call us on 0345 721 3141. We'll treat it as a new application which means you must
be 18 or over and we'll take into account any new information you tell us. This won't affect your
credit score.
If you'd like a different limit you can apply for this online or over the phone.
Arranged overdrafts are subject to application and approval, and are repayable at any time in full
on demand. Our decision will be based on what we already know about you and what you tell us in
your application. We can also reduce your arranged overdraft limit at any time.

It makes challenging their decision difficult as it'd be a fresh application and I might not get an overdraft at all which would be tricky to manage. Also I do get some UC now which I wasn't when I took out the overdraft although overall income hasn't changed much I don't know it that will count against me?

Ring them up, they may simply reinstate it if you ask. No harm in trying.

I just received an email from Barclays withdrawing my overdraft. In 35 years I have never used it and the money going into my account is far less since I took voluntary redundancy 18 months ago. It would appear the banks are reviewing accounts.

We had a letter from Barclays saying they were removing ours. It's only £100 and we've never even used it. Like to have it though, just in case. I called them and they said they'd have to at least reduce it. So they reduced it to £90. Didn't seem worth either their time or mine tbh!

They're protecting you from yourself because overdrafts are very expensive and they see use of one as indication of being bad at budgeting.

Sounds like you could avoid using it all together by using your credit card more than you do as it would mean that the money would stay in your current account longer and they'd also see that as being good at budgeting. Might sound counter intuitive, but that's how it is.

To help manage cashflow and reduce borrowing cost for the house repairs, what you need to do is apply for another credit card with a 0% offer then run up an amount of money eg £1-2k by paying for the repairs or just your normal food, petrol and day to day spending for a month. Transfer this to the 0% credit card and then you've got yourself an interest free loan of that amount and the flexibility you need to pay for the repairs. Just then pay it off before the new card starts charging interest, and also go back to using your original card for your day to day spending (pay off in full every month of course) instead of your overdraft, which you can pretend doesn't exist.

Look on Moneysaving Expert to find a card that will do a couple of years 0% balance transfer with no fees.

I had my overdraft of £3K with Barclays since I was a student 25 years ago. I hadn’t used it in the last 15 years and last month Barclays removed the facility entirely. I assumed that it was because I never utilised it but now seems that Barclays have done a massive review of accounts.

Our bank did this with dh and me. I asked for high limits to be able to move money around and when buying and selling property. However, we don’t do that so much anymore and we would use 0% credit cards if that were the case as they’re more cost effective. Idk if these are still available with the current rate of inflation.

@BarbaraofSeville a big reason I'm in my overdraft every month is because I pay off cc in full to avoid interest on that and then the overdraft is pennies a day for a week as it seemed cheaper. I probably do need to review budgeting. Happily my ex has started a new job so I'm going to start getting child maintenance again which will take some pressure off.

Talk to them. Just say it makes you feel anxious to have such a small overdraft. Our bank reduced ours from £1450 to £290, and it made me feel uneasy even though we rarely use it. It's my safety net incase there's a payment I've forgotten about.

NatWest halved my credit card limit (which I’d never gone near) after lockdown 1, they said it was ‘because of Covid’ - they’re now pushing me to apply to put it up (I’ve still never gone near the limit). Ridiculous.

Could it be because you're not using it? It's a lot of available credit that is never being utilised.

I’m with Lloyds. I’ve never used my overdraft but it’s been reduced from £2,000 to £500. It’s odd, I have no idea why and I don’t recall them letting me know they would be doing it.

@Lilo They only sent me a letter through online banking which I don't normally check as most of it is notifications of crappy interest rates etc.

Off to have a read through my online letters now...

it frees up capital for them to lend elsewhere