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?

I imagine reducing them has something to do with consumer duty regulation. As part of Consumer Duty, the bank has to demonstrate that the product is offering fair value. However, charging everyone 30% interest regardless of personal circumstances is clearly not fair value. Particularly , where it is being used habitually, there are much more appropriate ways to obtain credit.

I had an overdraft for many, many, years and was constantly using it. The fees were minimal and the bank never asked me to repay it. I don't use it any more, but it's still there if I need it. Apparently the bank weren't at all concerned.

I have a £2k overdraft and am always in it but have money saved elsewhere. The interest is cheaper using it than if I were to use a credit card. I also have the same OD on my business account and use that one rarely. I'll pay myself ad hoc as and when the money comes into my business account. I also have credit cards which I pay off both with weekly payments (have always done this) and the monthly minimum. I also have a Next account which I pay into weekly with small amounts (I've done this for years), as this pays for flowers which I frequently seem to need to buy for birthdays/sad events or the odd bit of clothing I may need ). I swap to 0% cards when necessary. I call it 'money juggling' but it's necessary with my way of life, and last time I looked I had 100% credit score. Try and learn about money and APR's. For me, an overdraft has always been the cheapest form of borrowing.

"The more offers of interest free credit cards you get the worse your credit."

"Being offered lots of credit is not a good thing."

"Once you are in debt of any kind they want to keep you that way."

[emphasis added]

Only thing is though, apart from a credit card that I pay off every month I have no debt at all and haven't had for the last six years. The credit card has around a 9% utilisation for groceries and petrol etc.

In fact, Clear Score say that if I did have a mortgage then that would actually improve my credit score. So I'm not too sure about that statement of yours.

Maxing the overdraft every month is poor financial management. It means your baseline state is in debt and you have no margin for when the unexpected comes along. A well-run current account is usually still in the black at the end of the month but may dip into the overdraft occasionally when there's a big amount of expenditure like the dishwasher dies or the car needs 17 things done to pass its mot. An overdraft isn't a long term loan, it's a bit of flexibility to absorb the bumps like this. If someone is using it like a loan as you are, it's appropriate to instead arrange for a proper loan which you pay off at £50 per month or whatever you can manage, which will then be part of your regular outgoings as you work on living within your income.

As has been said, stop listening to people who know nothing about money! Read Martin Lewis on how to get out of debt. Overdrafts are the most expensive form of debt and yes, they are debt. His article on debt is here. https://www.moneysavingexpert.com/debt-help/
You can also listen to his podcast on credit and debit cards here. https://overcast.fm/+AAIp5_a5-DQ

Yet mine is similar, just over 700 but I have three CCJs (two active and one repaid). DHs is 765 and he had lots of historic missed payments (from 3/4 years ago). Yes we are in a different financial situation now and working really hard on improving our score (hoping to buy a house next year) but I can’t believe that with our history that’s classed as a ‘good’ score.

An overdraft is the most insidious type of debt available.

Interest rate on the whole is around 39.9% and there is no obligation to pay it off, so it just becomes mounting and mounting debt.

While it absolutely is possible to end up with out of control credit card debt, there is at least obligation to make repayments towards it on a monthly basis. Also, many of the banks will do interest free credit cards for x amount of months, which gives you a chance to pay them off.

I have two credit cards - one which was interest free for a year but which if I now spend on it I pay it off in full, and another one which is interest free until next March and which I am gradually paying down (have been in hospital so had to incur some expenses) but aim to have paid off before the interest free period expires.

Also, just because the national average credit score is 600 doesn’t make it good. A lot of people in the UK have a lot of debt. If the average is 600 then that is an indication that people in the UK are unable to manage their money and on the whole are a poor credit risk.

My credit score is 930 - I would be horrified if it even dropped below 850.

Actually it’s not strictly true that having 0 debt gives you a good credit score.

It’s true that a lot of debt will reduce your credit score, but if you have 0 credit then you are an unknown risk, which will affect your ability to get credit in the future.

But even something as simple as a mobile phone contract can kickstart your credit, so it doesn’t have to be a load of debt you can possibly lose control of.

Also your regularity of repayments will have an impact. If you repay your cards and other debts on time then you’re considered a better credit risk than someone who e.g. misses payments.

In my case, I think it's more that I don't have any credit at all - well, apart from a credit card for groceries and petrol that I pay off every month.

Paid off the mortgage about seven years ago (I bought my first house back in 1991) and since then haven't had any credit apart from paying off the credit card every month.

Ironically, Clear Score says that if I did get a mortgage (although who would give me a mortgage at my age I don't know) then that would actually improve my credit score.

Presumably (hopefully?) OP spends at least part of the month in the black, only using the OD for the period before payday? If so, the interest would not be sooo bad.
Either way, pay it off & once it is gone and you will always have 20-30pm more than you have now, excellent!

I have had the same thing happen to me - twice! and im afraid the underlying issue tends to be a change in credit history ( for the worse) & the fact you are relying on the over draft, and its considered persistent debt.

Best thing to do is work our a repayment plan and get out of it.

Avoid debt like the plague if u can.