Overdrafts in the UK.

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**Not Online!!!**

Argive wrote:
The student one is a juicy trap.. Being 18 and from a broke family and being the poor kid in school your whole life, whith no real life skills, you are suddenly being offered £1500 no strings attached. Until you finish uni that is, which might as well be 100 years in the future when you are young and dumb. So this is pretty hard to turn down, at 18-21 you don't know any better you're a dumb kid. Most of us were.. You see all your friends from well off families and what they have and what you see on the web and TV. Its natural you want a slice of that pie.. I have never ordered a take away until I went to university lol.

Anyway.. its easy to fall into this trap.
So I had this "friend"

He figured out he can transfer his young persosn account into a student account and get a £1000 facility instantly (increasingin by 500 upon request), go to another bank and open another account caveating you will be closing the other account yourself. Normaly they'd do the switch for you but if you say you want to be in charge of phasing your direct debits and payments etc. they wont even contact your "old bank" bank. They are happy to have you on as customer, due diligence be dammned. They are banks, they just want your money.
And at 18 you are spending that money.

So the banks make money from you while in overdtaft.. in transaction fees, direct debit fees, account fee whatever.
Then they charge you interest once your interest hits

So then you finish uni and you wake up to the fact you have all this overdraft and the bank send you a letter saying as you have graduated they are converting your accounts into a "post graduate account" which has the same overdraft facilities, yay, fabtastic.. except these charge interest..Should have red the small print kiddo. have fun GG. Before you know it you end up working in some call centre at just above minimum wage for a year or two just to pay off that damn overdaft. Then they sack you when you have a bad day as you have been eating a nice steamy turd sandwich all day long for 3 years...And you decide you have had enough... You decide to tell a halfwit customer you've been dealing with for 30 minutes to feth off and then, karen the TL to feth of as well when she tells you you've bene taking a dump for too long and you should go on your break.. Ya kno ?

Frankly, the bank isn't really at fault here, they do assume that you are capable at 18 years to do as you tell them. Infact they can't react any other way, else they'd have to assume that you'd not be capable of doing anything at all due to a psychological impairment. And no, generally propper banks are not after your "small fry" money. They are after investment oppurtunities.

Also, beyond that, any banking system offering you just 1500£ no strings attached seemingly, to a student, (or any broke member of society for that matter) is in serious need of getting a look at. Also, feth microcredit institutions. And feth even more the mafiosi down the street offering you x ammount of money.

However, and most importantly, if the only lesson learnt from poverty is to make debt, then frankly people haven't paid attention. (it reminds me as a whole of the subprime crises and the deruglation and "promotion" of home ownership for people that shouldn't ever have the chance at a mortgage.)

Anyway the point Im making that's just one of the examples of how a student may go down this route. But there are also people who although don't follow education work at the lower wage spectrum. Those people often have a that 18 year old mindset of wanting nice things and not thinking about their consequences. And that's how it goes.

The only time I ever did a payday loan was when I was unemployed broke, suicidal and really down in the gutter and just wanted some drugs.

The people that need these "loans" are the people that should be allowed them the lest, and that's the truth. As mentioned if you cannot budget and you need a loan you're not exactly the type that should be trusted with a debt.. and you don't earn so you need the loan, youre not exactly going to pay it off are you ? Its all just a machine churning out endless stream of customers and transactions while trying to syphon of ass much real physical resources as possible IMO.

Seems like the banks in your case got too much deregulated. Even funnier when you contextualise these basis with studentloans practices some other countries do. Sure as gak way to turn some of your brightest into wasted effort.

Now that I am much older and not so much wiser, I see the folly of it all and how easy they suck people in..
I would rather die before I owe any bank a broken penny.. I am one of the lucky few who have managed to pull their finger out in time, and get their head above water before drowning.

Regarding the credit card thing. I don't know how it used to be with mortgages but I'm in the process of taking out a mortgage and I have bene advised that a healthy credit score can really push you up the risk threshold ladder meaning you can essentially leverage a better amount and get a better house. I dunno maybe it wasn't true... who knows but it certainly doesn't hurt.

The most effective way I found of doing it is to have a credit card. Set up a direct debit to pay off the balance each month. and have a re-occurring payment like Netflix or spotify. This means there's a regular credit and repayment going through building up your credit score. Also registering as a voter as it means you can be equifaxed easily.

To my knowledge you want to be seen as "stable" as possible (Does your country have a debt register? if so and there is sometihng in there that is way more important f.e. for a bank then a high credit score atleast over here). Consider multiple banks for mortgages, tell them when another offers lower interest rates, play them against each other, also check out online offerings, which sometimes wary quite abit from regular offerings you get in a bank. Consider the baseline structure of your mortggage, some have one which demands a tranché be paid off in the near future whilest the rest can be laid to rest, infact having a debt can be overall advantagous in regards of what you have to pay as tax depending on your country though.

**Overread**

Honestly lets consider what education the average person gets with regard to managing their finances. In general my experience in school was that they don't really teach you finances at all. In fact it sort of gets tick-boxed by being put in the "life skills" class which no one really takes seriously (I suspect because teachers are more focused on things that generate exam results).

So many kids learn through their own experiences and through what their parents teach them (both directly and indirectly). As a result if you've got more than one generation with debt problems and financial ignorance. They are teaching the next; who teach the next etc. etc... Whilst some will have bad experiences that kick them the right way; others will get kicked the wrong way or will just flounder.

Far more could be done at the school level to educate. Of course the teachers would first need that education themselves. So part of it would be breaking a cycle.

A lot of finances aren't rocket science, but at the same time there are traps that are possible to fall into. The greatest risk is that many of these traps can setup a cycle of continual debt gain. I'd also say that since banks have shifted from local to central many people don't have the same relationship with their bank that they might have had 50 or 80 years ago. A bank manager that you had to go speak to in person for all your banking needs likely did have some effect on reducing the chances of people falling into debt.

Today its all electronic; heck you can flash your phone or fit-bit watch and pay for under £20 goods (those little costs can add up fast!). Plus you can't even do much at your bank (if you've even got a bank that isn't over an hour away); so much goes through the electronic system. So instead of the personal one-to-one with your manager you instead have a one-to-one with the automatic system. So chances are its actually more lenient in many ways and thus much easier to get credit. Esp for anyone who is on the borderline situations. Of course its much easier for banks to outright refuse people in exceptionally bad conditions

**Duskweaver**

Argive wrote:
Not sure that would make spiff of difference given the teenage pregnancy rates but that's a whole other kettle of fish lol.

The UK teenage pregnancy rate is at a historic low. It has more than halved since the 1990s. Sex ed can always be better, but it absolutely works.

**Not Online!!!**

Overread wrote:
Honestly lets consider what education the average person gets with regard to managing their finances. In general my experience in school was that they don't really teach you finances at all. In fact it sort of gets tick-boxed by being put in the "life skills" class which no one really takes seriously (I suspect because teachers are more focused on things that generate exam results).

So many kids learn through their own experiences and through what their parents teach them (both directly and indirectly). As a result if you've got more than one generation with debt problems and financial ignorance. They are teaching the next; who teach the next etc. etc... Whilst some will have bad experiences that kick them the right way; others will get kicked the wrong way or will just flounder.

Far more could be done at the school level to educate. Of course the teachers would first need that education themselves. So part of it would be breaking a cycle.

TBF, i come from a society in which you don't go directly into work, but rather do a scholling on any job, bit like the medieval apprenticship system, and coincidentally also named that way. Further when you get earlier in your life money (on average about 500-600 CHF / month which is a marginal ammount but still) and actual education in general law, political system and taxes and the vast majority of society is educated that way, then of course you will see less issues with it. However, that does not happen in regular schooling and practical experience trumps any school course to this day imo.

A lot of finances aren't rocket science, but at the same time there are traps that are possible to fall into. The greatest risk is that many of these traps can setup a cycle of continual debt gain. I'd also say that since banks have shifted from local to central many people don't have the same relationship with their bank that they might have had 50 or 80 years ago. A bank manager that you had to go speak to in person for all your banking needs likely did have some effect on reducing the chances of people falling into debt.

Frankly, you'd still get the local vis a vis experience in local banks here and i'd say yeah, having an financal educated person tell you that is a stupid or iffy idea did certainly lead to a more conservative spending habit. Altough my limited experiences with the UK and service are, well, imo quite a bit excessive cut costs to provide them, if there are even some services left provided in a village or smaller city.

Today its all electronic; heck you can flash your phone or fit-bit watch and pay for under £20 goods (those little costs can add up fast!). Plus you can't even do much at your bank (if you've even got a bank that isn't over an hour away); so much goes through the electronic system. So instead of the personal one-to-one with your manager you instead have a one-to-one with the automatic system. So chances are its actually more lenient in many ways and thus much easier to get credit. Esp for anyone who is on the borderline situations. Of course its much easier for banks to outright refuse people in exceptionally bad conditions

**Da Boss**

I used to teach life skills in a school in the UK. We did our best, but the students absolutely did not care unfortunately, and I have never seen kids so badly behaved as during my time in England. There is a strong streak of anti-intellectualism in society there from what I have seen.

But we did not cover finances. I used to teach maths, and we tried to cover it there, but the general cultural aversion to anything related to numbers (and fractions and percentages seemed to always be a particular problem!) often meant messages about how debt can accumulate and the folly of stuff like installment plans rather than saving did not really penetrate. I don't believe schools can really make up for what is fundamentally a cultural attitude. If you are culturally averse to debt (in German, the word for "debt" and the word for "guilt" are the same, and most Germans I know are pretty terrified of getting into debt!) you will avoid it in the same way you might avoid eating without washing your hands. It is not really the rational part of your brain deciding that, but the irrational, emotional part. It just works mostly in your benefit (it can be argued that the german horror of debt is actually harmful in some ways because it means Germany does not invest enough in it's infrastructure and so on).

The UK has a lax cultural atitude to debt, particularly in the South of England. Debt is seen as normal, and has been intentionally normalised in my opinion. The financial industry is the most successful part of the UK economy, and people are used to the idea of financial products as being normal. Just look at how easily people accepted huge debt for their education in England. In Germany, it is just paid for through taxation and there is no personal debt and therefore no profit for banks from education.

Ireland is similar, I think, or became similar during the Celtic Tiger years. I grew up with more old fashioned parents, so I have always had a horror of debt, but I would not say it was anything more than a cultural preference. I certainly was never educated about it in school aside from broadly how I attempted to educate the yoof of England about it.

**queen_annes_revenge**

Da Boss wrote:
I used to teach life skills in a school in the UK. We did our best, but the students absolutely did not care unfortunately, and I have never seen kids so badly behaved as during my time in England. There is a strong streak of anti-intellectualism in society there from what I have seen.

Hell yeah we do. I remember pse (as it was called then) was always a little bit of a lax lesson, but I actually enjoyed it, the subjects were new and often had more grown up subject matter, and there was no exams so it was easy to pay attention without worrying about them. I don't know.
It's difficult to educate teenagers about finances, because at that point in life it just doesn't affect them.. So they don't care. I was the same. But at the same time the lack of education is definitely a problem.

**Da Boss**

It is technically there as part of mathematics, but people tend to just sack that off with "maths is hard" and not give it a proper go.

I agree though, if you are gonna have Lifeskills, personal finances should be part of it.

But you know, we do sex ed, drugs ed, relationship ed, personal hygene and health, organisational skills, study skills...along with teaching all the other stuff. So the question becomes, if you want to add personal finances to the list, what do you take away? Less time in PE? English? Maths? Science? Humanities? The Arts? Or just reduce school holidays and pay all the teachers more?

I found it pretty common in the UK for people to blame institutions for stuff. And sometimes that is fair. But I found British teachers to be the most hard working I have ever worked with, and they still got criticised as lazy and useless. I reckon people do need to take some personal responsibility, and the banks need to be regulated to make them more responsible, too.

**Mad Doc Grotsnik**

Banks are regulated in the UK, indeed my career kinda depends on it.

Trouble is, as with any law, they’re not written perfectly, which leaves room for interpretation, especially when more than one can be applicable.

Wiser minds than mine make decisions based on those, then I apply them to specific complaints. It’s rather fun, and I’m pretty good at it.

Yet a fair chunk of complaints are akin to “I borrowed munneh, why should I pay it back” etc.

**Overread**

Mad Doc Grotsnik wrote:

Yet a fair chunk of complaints are akin to “I borrowed munneh, why should I pay it back” etc.

Out of interest of them how many are more akin to:
1) I can't pay it back cause I can't afford it today, give me until next month and I can start
2) I can't pay because my budget won't get into the positive to actually let me pay (whilst being clear that they are not being frivolous with their budget)
3) I can't pay because I really don't want too why should I.

Or are you already removing 1 and 2 from the list of "fair chunk of complaints"? Just curious how much of it is people incapable/delaying or those who are just purely trying to get free stuff/don't understand how loans even work.

**Mad Doc Grotsnik**

Well, banks are under an obligation to treat customers in financial difficulty fairly. So the first two are fairly rare at my end of things. If someone is in a temporary pickle, things usually get sorted.

So that tends leave me the occasions when banks could and should’ve done better. And somewhat entitled persons who have bizarre demands,

Such as the person objecting to a raise in overdraft fees, demanding they cancel all charges for everyone everywhere etc. Except I can only deal with individual issues (we’re not the regulator, at all), and this customer had never actually used their overdraft. So at the time, the change in charging structure didn’t affect them at all. Yeah.....that was ‘fun’.

**Argive**

Duskweaver wrote:
Argive wrote:
Not sure that would make spiff of difference given the teenage pregnancy rates but that's a whole other kettle of fish lol.

The UK teenage pregnancy rate is at a historic low. It has more than halved since the 1990s. Sex ed can always be better, but it absolutely works.

It is still the highest in Europe. But you are right, there's certainly been a decrease and I wasn't quite aware how rapidly over the last couple years this has happened, I haven't been paying attention but its somewhat encouraging. Thank you for pointing this out.

Da Boss wrote:
I found it pretty common in the UK for people to blame institutions for stuff. And sometimes that is fair. But I found British teachers to be the most hard working I have ever worked with, and they still got criticised as lazy and useless. I reckon people do need to take some personal responsibility, and the banks need to be regulated to make them more responsible, too.

Yes absolutely! I was not trying to imply at all that its the schools or teachers fault. Banks need to be regulated, and regulate beter. And people need to take more responsibility themselves of course. And it all starts with education.

I really feel bad for teachers in the UK, and the gakky attitudes they have to deal with form children and parents.. Hands down, education starts and is the most important at home IMO. Children will absorb whatever they are exposed to like a sponge... And sadly when I see a lot of people with children I begin to question humanity's direction.
I know one couple whose kid is nearly 5 and does not speak yet... He just points at things he wants and grunts angrily 90% of the time.. or repeats caroon speak ( for the record there is absolutely nothing wrong with him at all) This is because rather then deal with him they give him an I-pad and they basically don't interact with him at all... Its terrifying and sad to watch. Im no expert so no idea what that's doing to his development but I cant imagine its anything good.

I cant imagine any money related life skills are being transferred in debt ridden families either. Not to mention a lot of people find it reasonable to get in huge debt just to buy a bunch of expensive gizmos for their children and not teaching them about earning it or consequences.

**Mad Doc Grotsnik**

The education angle is an odd one. As others correctly said, this isn’t on the schools nor teachers.

But, to some extent, it’s not necessarily on the parents either. That’s because holes in education are rarely immediately apparent. Stuff like a lack of financial knowledge can take years to manifest, and by the time it has, poor ideas are embedded, and the devil to shift.

**Orlanth**

My overdraft limit suddenly vanished without warning. Maybe this is related.
I don t know why this should be, financial responsibility is one of my strong suits. I rarely and barely dip below zero and never for long

**Azreal13**

It might not have actually gone anywhere, part of this swathe of changes has been that the banks no longer show your overdraft facility as part of your balance, and if you are overdrawn it won't show how much is available to spend any more, simply your facility limit and your current (negative) balance.

Which arguably seems more likely to trip people up than clearly displaying how near their limit people are, but there you go.

**Mad Doc Grotsnik**

Orlanth wrote:
My overdraft limit suddenly vanished without warning. Maybe this is related.
I don t know why this should be, financial responsibility is one of my strong suits. I rarely and barely dip below zero and never for long

Very possibly removed precisely because you don’t use it.

Might be worth asking your bank, as they should’ve informed you beforehand.

**OrlandotheTechnicoloured**

Orlanth wrote:
My overdraft limit suddenly vanished without warning. Maybe this is related.
I don t know why this should be, financial responsibility is one of my strong suits. I rarely and barely dip below zero and never for long

Banks are no longer allowed to show your overdraft as part of your available balance (so £100 in your account and £500 available overdraft was shown as £600, now it would only show £100)

so it might still be there (especially if they've not written to you formally withdrawing it which I suspect they'd need to have done)

**Not Online!!!**

OrlandotheTechnicoloured wrote:
Orlanth wrote:
My overdraft limit suddenly vanished without warning. Maybe this is related.
I don t know why this should be, financial responsibility is one of my strong suits. I rarely and barely dip below zero and never for long

Banks are no longer allowed to show your overdraft as part of your available balance (so £100 in your account and £500 available overdraft was shown as £600, now it would only show £100)

so it might still be there (especially if they've not written to you formally withdrawing it which I suspect they'd need to have done)

which is only correct.

**Overread**

Not Online!!! wrote:
OrlandotheTechnicoloured wrote:
Orlanth wrote:
My overdraft limit suddenly vanished without warning. Maybe this is related.
I don t know why this should be, financial responsibility is one of my strong suits. I rarely and barely dip below zero and never for long

Banks are no longer allowed to show your overdraft as part of your available balance (so £100 in your account and £500 available overdraft was shown as £600, now it would only show £100)

so it might still be there (especially if they've not written to you formally withdrawing it which I suspect they'd need to have done)

which is only correct.

Until you're in the overdraft and then it no longer tells you what your overdraft limit is. Which can be a pain if you operate more than one account and are simply checking your finances at a "hole in the wall". It means you've got to memorize and and all limits manually otherwise you could easily go into the overdraft and then go over the arranged limit.

I can agree to them not showing the amount when you're in the positive, to discourage you feeling you've more money than you do; but once in the overdraft it really should show the limit point before you go beyond it.

**Mad Doc Grotsnik**

Not entirely sure that’s right, but been off work for a few weeks due to head weasels.

However, checked my own balance, and it still declares my overdraft limit?

**nfe**

Just had a look at my own. One of my RBS accounts was in its overdraft and gave my available balance down to the limit of that overdraft.

I transferred money over to clear the overdraft and it still gives the available balance as to the bottom of the overdraft.

Also looked at my HSBC accounts and same again (I wasn't in the overdraft there, but it adds the overdraft limit to the available balance.

**Mad Doc Grotsnik**

Yeah.

Not including the overdraft balance (or rather, limit I guess) seems incredibly counter productive?

**Not Online!!!**

That's like, the worst possble implementation of this.......

**Orlanth**

OrlandotheTechnicoloured wrote:
Orlanth wrote:
My overdraft limit suddenly vanished without warning. Maybe this is related.
I don t know why this should be, financial responsibility is one of my strong suits. I rarely and barely dip below zero and never for long

Banks are no longer allowed to show your overdraft as part of your available balance (so £100 in your account and £500 available overdraft was shown as £600, now it would only show £100)

so it might still be there (especially if they've not written to you formally withdrawing it which I suspect they'd need to have done)

Looking carefully this appears to be the case. Yes my available limit is now the same as my credit total and my available overdraft limit is in parenthesis.
Thank you to all in the thread pointing out this. It had puzzled me, but I had put off investigation because I try very hard never to go overdrawn.
Nasak is bad stuff (sp). Its a Biblical Hebrew word meaning both 'loan interest' and 'the bite of a venomous serpent'.

**nfe**

Orlanth wrote:

Nasak is bad stuff (sp). Its a Biblical Hebrew word meaning both 'loan interest' and 'the bite of a venomous serpent'.

Nashak (נשך) is interest or (any) bite. Nasak (נסך) is to weave.

**Frozocrone**

I am one of those people that is permanently in their overdraft, having been naive as a student for that delicious £2000 interest free overdraft that changed to a student/graduate interest added account.

Thankfully my money spending has been curtailed and I like to think I've grown up since 2019 where I made some seriously stupid life decisions.

I've also overpaid tax through no fault of my own and I'm expecting a big refund which is going to clear my overdraft. NatWest is thankfully not implementing these changes until April 2020 (to my knowledge).

That in mind, I'm not sure what I make of these changes. On the one hand, it's probably going to encourage people to stay out of their overdraft. On the other, those already in their overdraft (and not as lucky as myself) seem like their going to struggle to get in the black more than they are now.

Schools definitely need to teach financing to young people if they haven't already. I can't remember being taught a single thing about financing and have had to rely on my parents for guidance.

**nareik**

Don’t forget to apply for your working tax credit.

**queen_annes_revenge**

On the news this morning they were saying this will actually benefit most people, in the sense that they won't potentially be hit with massive fees on unarranged overdraft use.

Aparantly the UK is 6 billion pounds overdrawn...

**Kilkrazy**

To be honest it seems to me that a lot of people will be better off with a flat 40% per year interest on overdrafts rather than 20% and various fees.

The important thing is not to live in your overdraft for a long time. If that's the way things are going, you will be a lot better off with a loan.

If you're someome who occasionally goes overdrawn at the end of the month because of some unavoidable unexpected cost, then gets back into positive figures in a few days, you are likely to be a lot better off.

**Overread**

Kilkrazy wrote:

If you're someome who occasionally goes overdrawn at the end of the month because of some unavoidable unexpected cost, then gets back into positive figures in a few days, you are likely to be a lot better off.

Except if this happened more than once you'd just setup a simple small overdraft with way less interest on it so that when you went into it it was already there.

**Mad Doc Grotsnik**

And in a complete surprise to no-one at all, the FCA has now written to Banks, asking them all to explain how they each came to a suspiciously similar APR for overdrafts.