…And Why You Shouldn’t Have One.
You might think that your bank is doing you a favour by giving you an overdraft facility, but the only advantage of an overdraft is to make your bank some money. If you think about it, you will be paying anything from a few pence to a couple of pounds each month, depending on how many days, and how much of your overdraft that you use, and if you multiply these charges by the number of customers that use their overdraught facility each month, it will add up to a tidy sum, I can tell you.
Example; say your bank has one million customers and four hundred and fifty thousand of those customers use their overdraft this month, and are charged 73 pence each 0.73 x 450000 = a whopping £328,500.00 profit for your bank.
When I switched my bank account a few years ago I had an overdraft of £500.00, and because it was there, I used it, and towards the end of each month, before payday, and after all of my monthly bills were paid, I used to see how much cash was available to me. I was always in or getting near to using my overdraft limit, and I was thinking to myself that I could move some of this money to my savings account, but I did not like to, as I felt it was the banks’ money and not mine.
One day, I was in my overdraft again when I decided that I did not want it any more, after all, I had never gone outside my pre-arranged limit, so I reckoned I would be able to keep my balance in the black. So, I moved five hundred pounds from my savings account to my current account to put my account in credit, I then phoned the bank and asked them to remove the overdraft facility from my account. Doing this still left me with the same amount of cash to last me until next payday, except that the money belonged to me and not the bank.
Now when my pay arrives in my current account it is all mine, none of it had been taken by the overdraft, and I am able to work out how much I could save after I have paid all of my household bills. If you think about it, when we used cash and all of it was gone, it was gone, and one could not have a negative balance, so why would you want an overdraft? It is only in the bank’s interest because one would be paying for it.
In conclusion, if you have an overdraft and you keep within it, you should be able to do without it, so you should do yourself a favour, and ask your bank to remove your overdraft facility, and you will avoid paying any fees that the bank may charge you for using your overdraft thus saving you a few quid each year.
If you have removed your overdraft from your account, never had one in the first place or are thinking of removing it, then I would like to hear about it, please leave a comment in the box below.