Barclays removing overdraft facility

[Tumbleweed101]

I had a letter from the bank saying as I’ve not used the overdraft in the last 12 months they are removing the overdraft on the account. I don’t need it at the moment but it’s always been reassuring knowing that extra money is there as back up.

Does anyone know -
Is there anything I should be aware of with this happening? Does it change my ability to get loans/credit card, for example.
If I needed it at another time do banks usually reinstate on request?
Anything else?

Having and using an overdraft is detrimental, not advantageous for your credit profile.

The only reason to really have the facility is so you don't face fees or have payments bounce if something unexpected comes out of your bank at the wrong time, but seeing as they can't charge you any more, the fees aren't a worry now.

Plus they now warn you if they're trying to take a payment and you don't have money available, so if you have money in another account, you can move it over to plug the gap.

If you want access to money to solve a cashflow problem or spread the cost of a larger purchase, that's what credit cards are for and responsible use is advantageous, not detrimental to your credit history.

So the best thing to do is to not worry about the lack of an overdraft, make sure you have a credit card and actually use it for some of your normal spending to keep it 'live' and demonstrate you can use credit responsibly. Set up a direct debit to pay the balance off in full every month and treat this like any other bill.

That will give you a little extra slack in your budget, as it delays some of your spending from affecting the balance in your current account by a few weeks and also put you in the best position to have access to further credit should you ever need it.

I also got this letter recently. I’ve banked with them for 30 years and always had an overdraft so was really surprised. It’s correct that I haven’t used it for a few years; I use my Barclays credit card for spending and then pay it off each month when I’m paid.

I was quite miffed though and still don’t really understand why they are doing it!

It’s not really “extra money” though is it? You are still borrowing it.

if you really want it, then give them a call and ask to have it re-instated. Or as a PP suggested, consider a credit card that you set up a direct debit to pay off in full every month?

I also got this letter and I looked into it. I couldn't find any evidence it will be detrimental to have an unused overdraft removed.

Banks are reducing overdraft facilities because they have to record it on their balance sheets as potential borrowing, and possibly have limits on this that they have to comply with (I'm not sure about the exact rules, but it's something along these lines, but in any case, it's not in their interest to have lots of people with overdraft facilities that are never used).

Any institution has a limit on the amount of borrowing their allowed to provide, so if you're not using your overdraft (and therefore they can't make any money) they'll withdraw it so they can use the allocation elsewhere.

An unused overdraft is dead money as far as the bank is concerned - it's earmarked in case you suddenly use it, so the bank can't do anything else with it in the meantime.

Oh ok, yes that does all make sense - thank you PPs for explaining! So they are doing this en masse to free up more money rather than having a dig at just me and the OP