Bank wants overdraft repaying - why?

[SameDayNewName]

I know that they are perfectly entitled to ask for it to be repaid at any time. But it seems odd, as I've had it for years with no fuss. I called the bank, and the guy the other end, said that he didn't know the specifics, but often it was due to having a poor credit rating.

I've never checked my credit rating before, but just looked on "Clearscore" and it's 700 out of 1000, which is apparently good. The report doesn't show any issues or anything worrying.

So as not to drip feed, it's the Co-op bank, with an £1,000 overdraft. I do max it out every month.

So why does the bank suddenly want it back? Is it something I've done or not done? Or are banks less willing to lend? Or is it something else?

Tbf you do have tl be good and responsible with money to do it right. Ws don't know if OP is

Suggesting she gets a credit card isn’t a good idea. How will she pay the balance each month if she currently maxes out her £1000 overdraft?

My £200 overdraft has been removed. Never use it but it was good to have it just in case. Apparently because I never use it, I dont need it so they took it off me.

£1000 is a big overdraft to keep every month. It sounds like a good thing to be reducing it. Have you sat down and done a line by line budget? Are you just living beyond your means (a coffee here, a coffee there adds up) or do you need to really take action?

We have a mortgage (8 years in, never missed a payment).

I also have student debt - just the usual one that most people who went to uni have.

I also have a personal loan, for a decent used car. It was for £4k, and I'm about halfway through the term. It's with AA loans, and I've never missed a payment.

Really grateful for the replies!

Will respond later after I've had my tea and sorted everything for tomorrow.

People saying get a credit card, she needs up over drawn by £1000 every month. She will not be able to clear the balance every month as she will still need to pay back the £1000 she already owes.

In this circumstance, the only way a credit card would help is if she can do a 6/12 month 0% transfer and make sure she pays enough back every month to clear it before the end of the 0% term.

@SameDayNewName without knowing what your bank are charging you for the overdraft is hard to give any advice about the best way of borrowing. A credit card that you used 25% of the limit and repay in full every month will help your credit score in the longer term but you must be very careful you don’t start using it to run up balances.

If you never go into credit, it causes costs for the Bank.

It's also an indication of living beyond your means. It's like a permanent unpaid loan.

We also ended up well into our overdraft, deciding to reduce it each month ourselves made a massive difference to how we managed our money. It was also surprisingly easy.

Spending money you actually have instead of an overdraft feels much more real, it reset our ideas about spending and made us much more responsible.

I'm sorry, but this really is absolute rubbish.

I just had a look on clear score and it says that my current score is 755. I get no end of offers for interest free credit cards etc.

According to clear score the average for the UK is 585 and in my area the average is 590.

I don't know why you think that.

it Isn’t good to be in an overdraft every month- it shows poor financial resilience.

If I were in your shoes, I would be getting a credit card and using that for everyday spending. LIMITED TO YOUR BUDGET. Whatever you do, do not just accept what they give you - make it so you cannot spend more.

If you don’t have savings to turn to rather than using overdraft all the time, then, rather than using £50 to pay off the overdraft each month, I would be adding to a regular high interest saver account. You need some buffer savings for financial resilience in case anything goes wrong.

Once I have £1-2k, I would then look to come off the credit card.

Credit cards that I’ve had have a 60 day pay period. So then she’d get her 1 month buffer

In 2008 shortly after credit crash, I can remember Capital 1 wrote to me and said they were reducing my credit limit. Each time I made a payment they then reduced it by that same amount so I couldn't use it. I paid it off from savings and closed the account. A close friend of mine had similar with Egg
They have wrote to me countless times since offering me a new credit card. I would never get another with them. In times of credit crisis card companies start to do this and reduce people's credit limit.

Aren't you paying a lot of interest on that OD? Possibly up to 40% APR, maybe fees too?

Both ODs and credit cards are expensive forms of borrowing.

Your goal needs to be to not use the OD any more, you need to treat it like a loan and reduce your expenditure a little each month until it is paid off. Then consider your money all spent when you are at 0, not -1000. It isn't free money & you will have more money each month when you have paid it off and you no longer have OD interest/ fees to pay!

Me too, had an arranged overdraft on my account since the 90s. Never used it (at least not since the 90s lol). Removed by Barclays not long ago because it’s ’not affordable’

£100 overdraft, £4000 going into my current account every month 🤷‍♀️

That’s not a large OD by bank standards

The more offers of interest free credit cards you get the worse your credit. Once you are in debt of any kind they want to keep you that way.

Worked in uk banking / finance for last 20 years.

Being offered lots of credit is not a good thing.

my credit is 999 out of 1000 - never had it read 1000 so think that is unachievable.

It is because you are not using it they are removing. They are making no money from you interest. But by it being available to you and others that don’t use it makes their liquidity less overall. Stilly and frustrating but true

Persistently using it would I assume mean you don't save anything .. that's a huge red flag.
.

i was stuck in my overdraft for years. It was around £1400. The bank didn’t take it off me but did move me over from a 0% overdraft from my student account to paying interest on it which was a kick up the bum. I tried to spend as little as possible each month, then whatever was left of the overdraft at the end of the month I would reduce it by half that amount next month. So say at the end of the month I had £250 left of the overdraft to spend, I’d halve that amount and reduce the overdraft limit by £125. I did that slowly over several months, tried to earn some extra month and used that to immediately reduce the overdraft. Eventually I hit a £200 overdraft which was the minimum they allowed, so I started transferring the extra money into an account until I had £200 saved to pay it all off. It was the best decision I ever made. Your attitude to money is so different when your account is a positive balance. I’ve now built a £1000 emergency fund and am working on paying off what I have on credit - nothing major. Whatever you do don’t get a credit card. You’ll spend the balance and it’s really hard to pay it off if just paying the minimum payments. Agree with suggestions to look at Dave Ramsey. I’d take the £50 reduction a month as a blessing. I also used to track how many days each month I was out of the overdraft - so at the start it would only be a few days before I had a negative balance but over time I was spending most of the month out of it. This is important because you are only charged interest for the days it’s used! That was really motivating. I think the overdraft trap is hard to get out of and encouraged by banks handing out 0% overdrafts to uni students

That’s my point, but many ppl do not pay it off each month and the interest rate can be in excess of 30%

@UnderratedCabbage & @IOnlyWantSexMoneyPowerAndRevenge Ive never had issues with debt before, however have had two periods of maternity leave over the last 4.5 years, so ate into my overdraft then. Between babies, and since the youngest turned one, I have been back at work, but only part time. So every month, I spend what I earn, but haven't recouped the overdraft yet. Have upped my hours since the youngest got his 15 hours at nursery in January, and money has been less tight since. He gets 30 hours per week in September, so will up what I'm working again. Was looking forward to some breathing room! But obviously the universe has different plans.

I appreciate what everyone's saying though, about it not being a good long-term solution, thank-you.

Lots to think about re credit cards etc. I don't think I'd struggle to pay it off each month, as I do budget etc. But honestly, I'd rather just pay off the overdrafts by reducing each month (they said I can), and avoid the credit cards all together. I'm not really fussed about a good credit rating, was more curious as to why the bank had seemed to have a change of heart. Have a much better understanding though now 🙂 Perhaps if I have an emergency in future, I will go down the credit card, rather than overdraft route.

To answer those who asked, my interest rate was 35% (about £20 or £30 per month), however they have temporarily reduced to 18%, in light of the fact I can't pay them off in the timeframe requested 😳 So I think better than most credit cards.

Bank of Scotland reduced mine too from 2k to 1k although I hadn’t used it in a year. I wondered if unprofitable potential lending somehow reduced profitable lending elsewhere.

it isn’t better than a credit card because you have at least 30 days (often 60) days to pay it off each month (you must pay off the whole balance). Even if the credit card was 1000%, you wouldn’t pay any interest

You have been paying 30% more than you need to for years. Thats craziness.

I know you say you’re not fussed about a good credit rating, but it is a good idea to work on improving it - you’ll thank yourself when it comes to renewing your mortgage or if you need a loan for an emergency situation eg your boiler or car breaks down. You would be offered better rates. You can improve it by - eg:

• maintain a small amount of debt that you pay off regularly - e.g. a credit card for grocery shopping and pay it off every month, or pay your car insurance monthly (that counts as credit)
• Don’t apply for new credit more than every 6 months (hard credit check).
• Use under 25% of your available credit
• have a mortgage
• be on the electoral roll for a long time
• hold a current account for a long time.

Credit Karma is a good app for giving you tips. Just don’t get sucked into taking out the new products they advertise.

Btw 18% is awful. Have a look around for credit cards - you may get a 0% deal for x number of months. You need to look after the pennies when you’re trying to pay off debt. It’s madness to be paying chunks of interest to a bank - it’s money down the drain.