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Made in gb
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How do?

Word from the wise. As some will have seen, in response to a new Financial Conduct Authority rule, banks are changing how they charge for overdrafts.

Specifically, they now need to charge with a clear APR.

Some are getting in ahead of the new rule (kicks in April) and making the change already. So far Nationwide, HSBC and Santander have announced an eye watering 40% APR. And the others are expected to follow suit in due course.

This of course is going to be an increase in charges. And it may mean your overdraft is no longer affordable. So, what can you do?

First and foremost, you need to be aware that Overdrafts are repayable on demand. Unlike a Loan or a Credit Card, your bank can unilaterally withdraw your overdraft limit at the drop of a hat.

That’s because overdrafts are intended to be short term lending. Something you dip into now and again, and repay in short order. Of course, few actually use them that way. That’s not a criticism of the individual, just a statement of fact.

Secondly? There are other consumer laws which can assist you. For instance, and I forget the exact one, but it’s in the Consumer Rights Act. It boils down to banks not being able to simply foist higher costs unilaterally, where the borrower has no alternative but to accept. In layman’s terms, that means if your overdraft is jacked up in price, or called in, if you’re not in a position to repay it, it’s unfair for the bank to charge you. There, the contract essentially comes to an end, and you come to a repayment arrangement with your bank, where you just pay of the capital over an agreed period.

Downside is that it can affect your credit rating.

So, be prepared, I guess. Start looking at your wider finances now. And if there’s a hole in them, start a dialogue with your bank about finding a way forward

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UK

I've heard a lot of anger over this. There are a lot of people who are in and out of their overdraft every month (out on pay day - back in just before) and hitting them all with 40% interest is only going to dig them further in from fairly manageable debt into a downward spiral.

All this because Banks were being told not to overcharge on their unarranged overdrafts.

Honestly it comes off as rather spiteful/greedy from the banks pure and simple. Which is curious in a time when they are closing so many branches and even pulling out a lot of cash machines as well.



I foresee a lot of people will take out a creditcard or loan to cover them in the short run of this. What happens in the long run is hard to say. I can see students being hit hard considering banks still encourage them grossly into using their overdrafts. By the 3rd year you can have up to £3K in overdraft facilities and that's all without any interest. Suddenly turning that into a potential 40% interest is a whopping big fine for doing what the bank was encouraging a student to do for 3 years.

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Indeed. Dealt with the fall out of a certain major high street bank upping its charges a year or so ago. And that caused a significant hoo-ha, spesh when they dug their heels in.

Now it’s gonna be all of them? I’m dreading having nothing but in my case load!


Automatically Appended Next Post:
You should also see what some people have as their overdraft.

We’re genuinely talking five figures in more than a few cases. Often hangovers from before the 2008 crash, when banks leant money like it was confetti.

How some poor bugger, who may very well have since retired, is meant to reduce that ‘short term lending’ I don’t know.

Well, I do, professionally. They just often don’t like the how, which I do get.

But all the more reason to start looking into our own individual finances. For me? Soon to be receiving my inheritance from Dear Old Mumsie’s estate. And I’ll be using that to get myself 100% debt free. No more interest anywhere. Reduce my outgoings to a relative bee’s fart in the modern world. And stay that way.

I’m not in deep by any stretch, but no point having a stack of cash and also having debts, no?

May be worth discussing with family members too. This is likely one of the ‘but I didn’t think it included me’ things.

This message was edited 1 time. Last update was at 2020/01/14 17:16:39


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Hamilton, ON

Yorkshire Bank used to charge me £9 a day.

I was out of work and went overdrawn (by £3). By the time I got work and got paid a few weeks later the overdraft charges wiped out my entire paycheque AND I was still overdrawn.

I have never gone overdrawn since.

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Just banks being banks.

And given their preposterous interest rates? If you’ve got one, it might get called in, regardless of affordability.

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Luton, UK

 Mad Doc Grotsnik wrote:


First and foremost, you need to be aware that Overdrafts are repayable on demand. Unlike a Loan or a Credit Card, your bank can unilaterally withdraw your overdraft limit at the drop of a hat.



This came as a shock to me a year or so out of uni, where I'd pretty much lived with my (relatively small) overdraft as my '0' point for a while. I'd also maxed a credit card, as a student is wont to do when showered with free credit...

Then one day I got a letter telling my all my credit facilities were being withdrawn and could I make a payment sharpish to clear all the debts. Well, no. So I ended up having a meeting with someone who set me up on what I think was called a managed loan - they consolidated everything into a new account, with a very low interest rate, and I had to agree to regular payments to clear it, which took a little over 2 years.

Turns out it was something I could have done all along, but I'd just gotten used to my minimum wage job just about dealing with the interest on the various debts and the situation not improving.

So the moral of the story - don't just ignore debts and assume things will work out. My story was a long time ago but I'd assume most banks will have a similar process to help people get out of debt, if they're willing to put the money in!

“Good people are quick to help others in need, without hesitation or requiring proof the need is genuine. The wicked will believe they are fighting for good, but when others are in need they’ll be reluctant to help, withholding compassion until they see proof of that need. And yet Evil is quick to condemn, vilify and attack. For Evil, proof isn’t needed to bring harm, only hatred and a belief in the cause.” 
   
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Hamilton, ON

Most people also don't know that your bank can arrange deposits , payments and withdrawals in whatever order they please to make you go overdrawn.

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UK

 Excommunicatus wrote:
Yorkshire Bank used to charge me £9 a day.

I was out of work and went overdrawn (by £3). By the time I got work and got paid a few weeks later the overdraft charges wiped out my entire paycheque AND I was still overdrawn.

I have never gone overdrawn since.


Yeah un-arranged overdrafts had insane interest rates, so the banks were told to stop charging fees for them; so they've just gone to charging high interest for all overdrafts. I think they did introduce a cap, I think HSBC was capped at £80, however many who wound up there by accident would, of course, be on the fine line anyway so would likely still end up trapped in debt.

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Devon, UK

Yeah, this is where the disconnect seems to occur between regulators and the regulated.

Similar thing happened when OFCOM told the mobile operators to slash their EU roaming charges. The networks duly complied and jacked up the prices for using your phone in all the non EU countries.

Today they've announced that you'll no longer be able to use a credit card to place bets in the UK. I've not seen any provision mentioned to stop people using cash advances from their credit card (at substantially higher rates) and simply depositing that money into an account they can use.

All these gestures are well meaning enough, but they seldom do anything to make life better for the people they're intended to. Greed (and addiction) need stronger controls because they, uh, will find a way.

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Bodt

I never understand why people get massive overdrafts anyway? Like, you got a 2 grand overdraft but get paid 1200 per month? Wtf?

Can anyone explain why people do that? I know people who are still in debt on payday, because they're that deep in their overdraft.

I have a £100 overdraft, that's a legacy from when I worked part time earning 500 a month and paying my parents 100 in rent. I could probably get rid of it now. I never go into it because if I do get close to my limit I take a little from my savings.

This message was edited 1 time. Last update was at 2020/01/14 22:20:29


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Hamilton, ON

"Free money" innit?

Banks exist largely because people make terrible/reckless decisions with their money.

And then a £3 overdraft ends up costing you over £200.

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Glasgow

 queen_annes_revenge wrote:
I never understand why people get massive overdrafts anyway? Like, you got a 2 grand overdraft but get paid 1200 per month? Wtf?


Two reasons: First is the same reason people get payday loans. They're poor and living is expensive. Then their boiler breaks or their car fails an MOT or whatever. Second is they're young students, they're terrible at budgeting, and it feels like it'll get them through the month because they spent all their money partying, but then it happens again...

   
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UK

Also those students have no negative to using the full £3K loan that the bank automatically gives you as a 3rd year student using a student account. It basically is free money.


Furthermore overdrafts are one of those things where to get into them and get further into them all you need is a negative income per month - that's not all that hard to end up with.

Go a few months unemployed or only in a bottom end job and you could easily get into debt. Then the next job might only pay enough to hover in and out or not even get out of debt. All the time that debt increases too so you can very easily get people who are being steadily dug further and further into a hole.


It's not so much people who rush out and spend £5K on a whim (though that happens too - eg gambling); but far more likely that its a lot of smaller costs that just add up badly.

Banks encouraging people to use plastic instead of real money compounds this because its much harder to budget when its on plastic than as physical money in your hand.

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I shall return to my thread at some point tomorrow when I’m sober, not watching Dredd and able to dispense some nudging guidance properly.

Seriously. This is my realm, I know it well.

In the short term? Why do some people live in deep overdraft? Because stupidity on both sides. The person for asking, the institution for repeatedly agreeing.

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Bodt

A colleague pointed out to me that this may in fact be fairer. For example, rather than having a £25 charge levied against you for going into your overdraft by say £10, you'd only pay a charge of £4 at 40%? Correct me if this is wrong.

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UK

 queen_annes_revenge wrote:
A colleague pointed out to me that this may in fact be fairer. For example, rather than having a £25 charge levied against you for going into your overdraft by say £10, you'd only pay a charge of £4 at 40%? Correct me if this is wrong.


Aye its fairer for small values, but because its a flat 40% no matter how much, it adds up very fast.

At £10 its only £4
At £100 its £40
At £1000 its £400

If it were a true fair system then it would scale depending how much you owed. £4 on top of £10 overdraft for the average person isn't an insurmountable amount to overcome. However even £40 on £100 can be quite a big sum for some. Once you get into higher values the amount owed starts to move into a heavily punishing value. The other issue is that because its quite a big percentage its much easier for it to dig you into the overdraft for longer. If it can lock you in the overdraft for a whole paycheque period (week, month, however) then there's a greater chance that a person could end up in a debt spiral where they can't get themselves out.

It's basically a system that will force many into taking out loans or credit cards to try and get their costs down or at least try and manage their debt. Of course that's ok for those who are in the overdraft for something like a one off purchase - a car that broke, etc..... However for anyone who is basically dancing in and out through their regular budgeting, adding a loan on top isn't actually going to help their situation

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Bodt

Yeah a scaled system would be fairer in that regard. But at the same time, there needs to be a deterrent element I guess. Is it a daily charge too? Because that would add up crazy fast? I've only ever had the odd £5 overdraft fee because I never go into mine.

This message was edited 1 time. Last update was at 2020/01/15 12:43:04


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Tbh, as a student myself, you should not get access to a credit card anyways.
Or want one for that matter,way to easy to go overbudget and lose controll over your finances.

This message was edited 1 time. Last update was at 2020/01/15 12:50:55


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UK

The old unarranged overdraft fees were daily up to a limit point. The new system is a flat annual interest rate. So if you were £100 into your overdraft all year you'd owe them £140 at the end of the year to get out of your overdraft and back to 0.

I'd make a rough estimation that they'd thus take 1/12th of your overdraft fee per month from you. Of course if your amount goes up and down then that 1/12th value would adjust accordingly as well. Though I might be wrong on this latter part and the amount they take might vary bank to bank or could be more complex.


Automatically Appended Next Post:
Not Online!!! wrote:
Tbh, as a student myself, you should not get access to a credit card anyways.
Or want one for that matter,way to easy to go overbudget and lose controll over your finances.


I'd agree, however this isn't even a credit card.

UK side a typical student bank account gives you £1K in a free, no interest overdraft. Increasing by £1K each year for 3 years. Even if you don't intend to get into it the bank makes it VERY easy to get into it and puts no barriers up. Idont' think you even need to apply for the overdraft to increase, the bank just does it for you. Whilst the bank isn't forcing anyone they are very clearly setting a student up to make easy mistakes. Of course its also a valuable buffer for many students who do financially struggle when going to uni. That £3K might be food and rent for a few months when they have to ditch their part time job to focus on exams and coursework.

This message was edited 1 time. Last update was at 2020/01/15 12:53:51


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Bodt

I've always said that banks giving out credit cards to basically everyone was a terrible idea. I had one as soon as I turned 18. I literally never used it, and it ran out after a year. Never had one since.

They rope people in with ideas of building up credit scores, but its a bit of a scam really. When I applied for the mortgage on my house, I was still eligible for the top rate mortgage for my income, despite the bank saying I basically had no credit history. Its only a negative credit history that really affects mortgages and the like, which is what you're going to get if you get into credit card debt.

This message was edited 1 time. Last update was at 2020/01/15 12:59:31


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 Overread wrote:

Automatically Appended Next Post:
Not Online!!! wrote:
Tbh, as a student myself, you should not get access to a credit card anyways.
Or want one for that matter,way to easy to go overbudget and lose controll over your finances.


I'd agree, however this isn't even a credit card.

UK side a typical student bank account gives you £1K in a free, no interest overdraft. Increasing by £1K each year for 3 years. Even if you don't intend to get into it the bank makes it VERY easy to get into it and puts no barriers up. Idont' think you even need to apply for the overdraft to increase, the bank just does it for you. Whilst the bank isn't forcing anyone they are very clearly setting a student up to make easy mistakes. Of course its also a valuable buffer for many students who do financially struggle when going to uni. That £3K might be food and rent for a few months when they have to ditch their part time job to focus on exams and coursework.


this is disguting in practice, not responsible from the bank and taking it is not responsible for the individual at hand aswell.


Automatically Appended Next Post:
 queen_annes_revenge wrote:
I've always said that banks giving out credit cards to basically everyone was a terrible idea. I had one as soon as I turned 18. I literally never used it, and it ran out after a year. Never had one since.

They rope people in with ideas of building up credit scores, but its a bit of a scam really. When I applied for the mortgage on my house, I was still eligible for the top rate mortgage for my income, despite the bank saying I basically had no credit history. Its only a negative credit history that really affects mortgages and the like, which is what you're going to get if you get into credit card debt.


maybee it is just a mentality thing, but I LOATHE to owe someone something.

This message was edited 1 time. Last update was at 2020/01/15 13:02:43


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Bodt

Yeah I'm not interested in owing, especially the bank or the government. Its why I didn't use the forces help to buy for my property.

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Glasgow

 queen_annes_revenge wrote:
Yeah I'm not interested in owing, especially the bank or the government. Its why I didn't use the forces help to buy for my property.


But you have a mortgage, right?

Sadly, there's not many of us who can realistically manage to get through life without taking on pretty considerable debt at some point.

Student overdrafts are a different issue, but they really should be more arduous to set up.
   
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nfe wrote:
 queen_annes_revenge wrote:
Yeah I'm not interested in owing, especially the bank or the government. Its why I didn't use the forces help to buy for my property.


But you have a mortgage, right?

Sadly, there's not many of us who can realistically manage to get through life without taking on pretty considerable debt at some point.

Student overdrafts are a different issue, but they really should be more arduous to set up.


I think there's a difference with some types of debt. I personally hate credit cards and never use them unless I need the in-built payment protection they offer. Even then I pay them off immediately. A mortgage is very different, IMO. It's the only realistic way most of us can afford to buy a house but it also tends to be a much more managed process to get one in the first place. Credit cards are often thrown at people even when they have bad credit history and it's far too easy for people to get access to credit nowadays.
   
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Yeah, I loathe spending money I don't already have. I used to have quite the arguments with the missus about that, until her friends who did loan a lot got in trouble for it. Then she saw reason, bless her. Now to convince her that having savings is a good idea as well.
   
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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 ?

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.

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.

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In my experience, the issue isn’t debt itself as such, as a lack of basic financial education in the world.

Loans and Credit Cards are easy to use sensibly - but even easier to get into trouble with.

For instance, if I ever get a mortgage (unlikely, as I’m always single and live in Kent), I know enough to seek one with few if any early repayment or over payment fees. Even just an extra £50 a month chucked at it is coming off the capital owing, eventually reducing the interest I pay over it’s life.

Credit Cards? They come with a slew of consumer protections, notably The Payment Service Regulations 2017. Good for large purchases, such as holidays or white goods, because under the PSRs 2017, the lender is equally liable for things like condition and suitability of the goods, and breach of contract, as the seller (there are exceptions, such as paying through PayPal. Seriously. Don’t do that!). But, you need to have a financial plan to pay it off. Because only paying the minimum takes ages.

Loans? As long as it’s for a specific purpose, they have advantages over credit cards because they’re fixed term and fixed interest.

But it’s when peeps go ‘PHREE MUNNEH’ and max it out is when trouble occurs.

And that’s why gambling is soon to be a no-no on credit cards.

See, the card itself is a Credit Token. There for the consumer to use for what they will. But, the issuer still has to be a responsible lender. They’d never issue a loan if the declared purpose was ‘sticking it in a fixed odds betting machine’. But with credit cards? It’s harder to cover their buns. And notably, online gambling is an excepted transaction under the PSRs, which further complicates things if the consumer claims the spending wasn’t in fact them.

I could talk the hind legs off a donkey on this subject, so shall wrap it up! In summary?

Personal Credit is not an inherently bad thing. Used responsibly, it can really help people. But we need far better education.

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Its certainly seems easier if you are with someone to get capital together. Lifetime ISA saved my bacon in getting the capital together.

The holidays one not so much, if you have any form of insurance or Attol they will not pay out and you have to go through a claim there.

They flat out refused me money back for a Thomas cook holiday I paid for for me and the missus in September. Told I had to go through ATTOL (who told me the 60 days they state as their turn around was "just something we say and doesn't mean anythi

On your summary point, yeah totally. Some sort of basics financial advice class should be mandatory, bit like sex education, at schools/colleges warning people of the pitfalls of the gak.. Not sure that would make spiff of difference given the teenage pregnancy rates but that's a whole other kettle of fish lol.

https://www.dakkadakka.com/dakkaforum/posts/list/772746.page#10378083 - My progress/failblog painting blog thingy

AngryAngel80 wrote:
I don't know, when I see awesome rules, I'm like " Baby, your rules looking so fine. Maybe I gotta add you to my first strike battalion eh ? "
 
   
Made in gb
[DCM]
Bounding Ultramarine Assault Trooper





Mechanicum (building/painting)

For personal finance, the only education you need is Dave Ramsey's Baby Steps.

When you follow these simple steps it will transform your finances - was life changing for me.

And you can learn it all free from his YouTube channel.

   
 
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