Finance Choices
3.5m adults permanently overdrawn
A third of adults with a bank account are relying on their overdraft to get by, new research reveals.
With 40 million British adults holding a current account, 28 million of whom have an overdraft facility, price comparison website uSwitch finds that 35 per cent of all adults are relying on their overdrafts ? 14 million people.
Worryingly, one in four current account holders are permanently overdrawn, while two million workers start the month in their overdraft, even after they have been paid.
uSwitch finds that the average overdrawn balance is £-677, though men appear to be racking up higher overdrafts of an average of £-867. Female current account holders' overdrafts are smaller, at an average of £-515.
Nick White, head of personal finance at uSwitch, said: "Overdrafts are now an everyday part of life, but we are concerned about the increasing reliance that people are placing on them.
"They are no longer seen as a short-term borrowing facility ? and for the 3.5 million people in this country who are permanently overdrawn, they are an absolute necessity."
The research finds that 39 per cent of people are now using their overdraft to do their shopping, 14 per cent use it to pay for accommodation, be it their mortgage or rent, while 39 per cent use it to pay for bills.
Mr White added: "With no structured repayment scheme on an overdraft, we are worried that many people will struggle to pay the debt off."
Reliance on overdrafts is not just an ailment of those on low incomes, as the research finds that nearly a third of those surveyed who earn more than £40,000 have an overdraft, with 11 per cent admitting they are permanently overdrawn.
The report adds force to recent calls for greater financial education for Britons.
Mr White said: "What our report indicates is that many people do not even think of their overdraft as a debt in the same way as they would a credit card or a loan ? with 44 per cent not even knowing what interest rate they are paying on their regular borrowing.
"At the very least, it is clear that more needs to be done by the banks to communicate the key terms and conditions governing current accounts in 'plain English', and to improve financial literacy amongst their customers."
To look for a better overdraft facility visit our banking guide
With 40 million British adults holding a current account, 28 million of whom have an overdraft facility, price comparison website uSwitch finds that 35 per cent of all adults are relying on their overdrafts ? 14 million people.
Worryingly, one in four current account holders are permanently overdrawn, while two million workers start the month in their overdraft, even after they have been paid.
uSwitch finds that the average overdrawn balance is £-677, though men appear to be racking up higher overdrafts of an average of £-867. Female current account holders' overdrafts are smaller, at an average of £-515.
Nick White, head of personal finance at uSwitch, said: "Overdrafts are now an everyday part of life, but we are concerned about the increasing reliance that people are placing on them.
"They are no longer seen as a short-term borrowing facility ? and for the 3.5 million people in this country who are permanently overdrawn, they are an absolute necessity."
The research finds that 39 per cent of people are now using their overdraft to do their shopping, 14 per cent use it to pay for accommodation, be it their mortgage or rent, while 39 per cent use it to pay for bills.
Mr White added: "With no structured repayment scheme on an overdraft, we are worried that many people will struggle to pay the debt off."
Reliance on overdrafts is not just an ailment of those on low incomes, as the research finds that nearly a third of those surveyed who earn more than £40,000 have an overdraft, with 11 per cent admitting they are permanently overdrawn.
The report adds force to recent calls for greater financial education for Britons.
Mr White said: "What our report indicates is that many people do not even think of their overdraft as a debt in the same way as they would a credit card or a loan ? with 44 per cent not even knowing what interest rate they are paying on their regular borrowing.
"At the very least, it is clear that more needs to be done by the banks to communicate the key terms and conditions governing current accounts in 'plain English', and to improve financial literacy amongst their customers."
To look for a better overdraft facility visit our banking guide
posted by Bruce Wayne at 8:52 AM
3.5m adults permanently overdrawn
8 Comments:
With that ammount of debt even a small interest rate hike of 0.25% is gonna start hurting people. Be afraid people, be very afraid!
Gotta say most people I know are OK - no mortgage - think a recession is coming and are preparing for a decade of 'it won't be so good from now on'
Because of this I was beginning to doubt the 'end of the world' mantra we sometimes here.
Reading this I now appreciate just how f***ing thick most of the UK population are and am now more convinced than ever that 1) any rise in interest rates or external shock will result in melt down or 2) GB will do anything to avoid this (including giving out tax payers money to prevent it)
I was thinking of Spain (I have relatives there..but I also have relatives in Germany), and Germany is looking good - think I will join a language class.
i read recently that the oft are due to crack down on 'unfair overdraft charges'
"regulators are due to announce a crackdown on excessive overdraft charges and other unfair penalties that hit borrowers. The Office of Fair Trading is expected to announce its final decision next week on whether to impose a cap on penalty charges levied by banks and credit card lenders. It is expected to set a limit on the charges that lenders can make when borrowers fail to make credit card payments on time or exceed their overdraft limits. "
so these poor unfortunate people that can't manage basic mathematics - i.e
(total spending) > (total income) = debt
are once again being helped out.
fair enough if something goes wrong at the bank which temporarily means you go in the red - there should be no charge.
however, if you're consistently in the red, heck, i'd say increase charges exponentially. why is it that the stupid are always helped out, while the clever (i.e. savers or those who balance their monthly budget) are made to look stupid.
increase charges, make people bankrupt and put them in the workhouse. harsh as it may be, how else are these numpties going to learn that debt = bad if you can't repay it.
So UK banks make a fair portion of there profits from overdraft charges then. If the OFT start imposing limits to these 'borrowers penalty' charges then they will start to look elsewhere to make the difference. It wont take much of a stretch of the imagination to see that annual account keeping charges to be introduced or increased if they are already in place on normal accounts. So we go from a system that largely targets those that fail to meet there obligations to the lender to a system that everyone has to pay in someway.
Take a look at the banking system in Australia. The banks there do exactly this, monthly account charges, limited number of transactions per month, extorniate ATM charges etc. Incidentally overdraft bank accounts are rarity in oz, mainly applicable to business accounts.
No overdraft protection here - and I stay under the amount that I have - I frequent my bank accounts VIA online so I make sure that things are looking good and nothing fishy is going on.
I don't really know. I have only had a bounced check once. I made up a deposit and never made it. I thought i did. That was before I had a computer. Now I check my checking accounts every day. I balance mine too, by hand, but not as quick as I should.
I have overdraft protection, as I would rather pay a small finance charge for an error than an NSF fee. I keep the overdraft paid off...if I do tap into it (thanks to my DH having a debit card ..grrr..) I know it same day- next at latest...because I check my account daily...and pay the overdraft back right away. (finance chare is usually zero or just a few pennies)...If I didn't have that protection, each boo-boo would be $25 (ouch)
Funny story...here recently my dog (Grace, whose blind and senile) sniffed out DHs brownies off the counter and ate them...I called DH and suggested he pick up a mix to make some more if he wanted some that night. So he did.. a fancy kind that he spent more than I ever would have...later that night I check the account and there is a $9 debit from the store....NINE DOLLARS FOR BROWNIES...so I went storming off upstairs and ranted about the brownies...come to find out he had snuck in an extra $5 cash back for himself...Boy was he shocked that he couldn't get away with it for even a few hours LOL...
I have never been overdrawn in my life... but i also am not like many people out there trying to be like the jones or hiltons or whoever... I live within my means and yet still have fun with life
but i am sure there are many people that have been over drawn many banks offer over draw protection that they set u up with line of credit called overdraft protection that if you are overdrawn you don't azccrue any fees as that money is drawn from your credit line.. but if you don't pay that credit line on time you will be hit up with fees.
Post a Comment
<< Home