Bank reducing overdraft

[Belledan1]

Due to financial struggles years ago, I have got quite a high overdraft. Fortunately we have hardly used it the last two years due to refinancing and paying it down. Occasionally go in to it but very rare now. Was always a back up though. Just been told Bank reducing it by 1000. It was 1200. I know its a good thing in a way and good for credit rating but quite shocked they are doing this to people especially how things are. Suppose its a responsible lender. Imagine they couldn't do it if you used it every month.

They're probably doing it because they have to account for overdrafts on their balance sheet as potential borrowing.

But don't worry about it, overdrafts are a really bad way of managing your cashflow. The banks don't like it and it's very expensive.

It's much better to use a credit card, which is free if you pay it off in full every month and delays any spending you put on it from being taken off your bank balance for about 3 to 7 weeks until the bill is paid.

Responsible use of a credit card also improves your credit history instead of being detrimental and you can even make money out of one by getting one with cashback or points.

So just get a cashback credit card, use it for your normal spending like food, travel, leisure etc etc and set up a direct debit to pay it off each month. Then you shouldn't ever need an overdraft anyway, because the money you'd otherwise spend on these things just sits in your current account until the credit card direct debit is taken.

Makes it much easier to manage your current account too as you don't spend from it. You just need to check once a month that there's enough money in for all your direct debits, including last month's credit card bill.

But a small overdraft like £200 is useful in case anything unexpected comes out of your account. Otherwise, just pretend that it doesn't exist.

BarbaraofSeville. Thank you for all the advice. Much appreciated x

Banks are obligated to encourage borrowers to use the night product to suit their needs. We have to report overdraft usage to the FCA. If you are not using an overdraft (or frequently at your limit), chances are there is a much better and cheaper product for you.

As the PP said, consider an emergencies credit card.

If you don't use it, you don't need it. You are better to manage without it. Are you afraid you will need to use credit in the near future?

Banks regularly review credit arrangements, but also they will be worried about people getting into higher debt in the months to come (thank you Liz Truss!).

Hi all. Thanks for the advice.