Banks make killing on 14 million overdrafts

The pips are starting to squeak for many .......

Banks make killing on overdrafts Sean Poulter, Daily Mail

31 March 2006

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FOURTEEN million Britons are weighed down by overdrafts - and the big banks are cashing in to the tune of £4.1bn a year.

The figure is up 40% in little over two years after banks imposed big increases in penalty charges, a report published today reveals.

It highlights that for many Britons overdrafts have become a necessity, not a short-term borrowing facility.

Customers can be hit by a fee of £30 for a single 'offence' of going over their limit. This then triggers a host of other fees, which can be as much as £39 a time, for bouncing cheques and declining direct debits or standing orders.

The screw is turned even tighter by sky-high interest rates, running at close to 30% with many banks.

The report, by price comparison company uswitch.com, said the banks view overdraft charges as a huge money-spinner.

Around 28m people have an overdraft facility on their account, with 14m making regular use of it. It puts the running total for this overdraft at £10.1bn, an increase of 125% in just six years.

The report found that two million people exceed their authorised overdraft limit, or go overdrawn without authorisation, at least four times a year - generating an annual bill of £280 each.

Meanwhile, some 3.5m are permanently overdrawn - and are suffering huge costs and charges. An estimated two million of the nation's workers are still overdrawn even after money has gone into their account on payday.

Britain's personal debt mountain - which now stands at some £1.2trillion - is generating huge profits for the big banks, according to uswitch.

Nick White, head of personal finance at uswitch, said: 'Overdraft charges are a huge moneyspinner for the banks, who are estimated to rake in around £3bn a year from people who go overdrawn without authorisation or who exceed their authorised overdraft limit.

'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 3.5million people in this country who are permanently overdrawn, they are an absolute necessity.

'People are now relying on their overdraft to buy their shopping (39%), pay their mortgage or rent (14%) and to pay their bills (39%).'

Keith Tondeur, chief executive of the money education charity Credit Action, said: 'This survey throws up some really frightening figures and trends.

'Millions of us are permanently living beyond our means and the lack of even basic money education means most of us haven't the faintest idea how much this is costing us.

'Overdrafts have gone from being a facility to use in an emergency to something we depend on. While some of the blame for this can be laid at the lenders' door it also says something about the 'short-termism' and instant gratification culture that engulfs our society.'

The British Bankers' Association yesterday unveiled changes to its code, which it claims will tackle the problems of 'binge lending'.

Bank staff have been found dishing out big loans to customers without making proper checks on their ability to repay. Some have authorised loans despite clear evidence customers could not make repayments.

The new regime includes provisions for tighter checks on the finances of potential customers. However, the scheme has already been dismissed as a cosmetic exercise by some commentators.

Banking industry expert Iain MacQueen-Sims said: 'This is window dressing. The banks like to give the impression of action, but nothing will change.'

Mr MacQueen-Sims, of audit company OmniCheK, said the problem stems from the fact that the banks effectively regulate themselves, when it comes to current accounts at least, through the Banking Code Standards Board.

'The existing banking watchdog is incapable of performing any useful role,' he added. 'The country needs an official watchdog with teeth.'

Reply to
Crowley
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"Crowley" wrote in news: snipped-for-privacy@v46g2000cwv.googlegroups.com:

You seem to post a lot of these 'financial' posts, Crowley. Are you having financial difficulties? And if not, why not? The rest of us are! :-D

Reply to
Frinkenstein

I'm not - my bank has just thrown a 10k overdraft at me (I had 5k for the past 3 years and never used it). I've never been offered so many unsecured credit cards and loans in my life in spite of a lousy credit rating due to lack of income. Can't get a mortgage for love nor money though, even though it's secured on a property. Funny old world innit?

Reply to
Maria

It's because he's saved his money and not made a 'ridiculous' house purchase like the rest of us.

Reply to
Sam Smith

In message , Crowley writes

What on earth is new about this story.... I was hit by inordinate fees and penalties when I went over my limit in 1977... 30 ****** years ago!!

Reply to
Richard Faulkner

An overdraft is a financial service. Banks make money out of providing financial services just as any other business makes money out of providing services. Hardly earrth shattering stuff.

My garage makes money out of providing motor vehicle repairs and servicing. This Monday they charged me an arm and a leg for around 3 hours work. They refused to budge on the bill and so I shall not be troubling them again. Banks are not immune in similar respect.

It's cheaper not to get into debt but sometimes you have to. If you do debt is cheaper if it is pre-planned. The easiest method is not always or even most probably the cheapest.

Reply to
Mel Rowing

He is desperately hoping the housing market will crash so he can afford to buy a house.

I'm hoping that will happen as well.

Reply to
Jonathan Bryce

Get a job then, you dole-sponging yid!!!!! BWWWUUUHHUUUURRRRGGGHHHHHHH!!!!!

Reply to
panhandler_14_88

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