A quarter of Brits are overdrawn
A quarter of British adults (26%) say that they are currently overdrawn on their current account – according to new research carried out on behalf of budgeting account provider thinkmoney – that’s the equivalent of more than 13 million people across the UK.
The majority of these people are in an authorised overdraft, which is one that they have agreed to with their bank or account provider. However, 1 in 10 (11%) of those who are overdrawn say that they are in an unauthorised overdraft, meaning they either don’t have an agreed overdraft, or have one but have exceeded their limit.
As you would expect, overdraft usage patterns vary:
22% of those currently overdrawn said that this was actually unusual and they rarely go into their overdraft
A third (33%) of those who are currently overdrawn say that they only use their overdraft for a couple of days each month
One in five (21%) admit that they are actually overdrawn for the majority of the month
5% say that they had been overdrawn for 1-2 months
But, most worryingly, a fifth (19%) of overdraft users say that they have been overdrawn for more than three months, so they’re essentially ‘living’ in their overdrafts.
Long term overdraft use can be an expensive way of borrowing and is a hard cycle to break out of once you are in it – especially as charges can quickly build up. Some providers charge daily usage fees of between £1 and £3 per day for authorised overdrafts, so the typical cost of a whole month in an authorised overdraft could be between £31 and £99. For an unauthorised overdraft, the equivalent cost of being a month overdrawn would typically be £155, plus any returned item charges.
Ian Williams, spokesman for thinkmoney, says: “For a quarter of current account customers, “free” banking isn’t free at all because they are overdrawn and likely to be racking up interest and charges. Overdrafts can be a convenient, flexible and cheap way of borrowing, but they can also prove to be extremely expensive.”
“The fee charging thinkmoney Personal Account is designed to help customers budget better by splitting the money needed for bills from spending money – and it prevents customers from going overdrawn.”