Unarranged overdraft fees that cost more than a payday loan

Beryl, I haven’t yet looked at this link but found years ago that having a credit card changed my attitude to spending somewhat. I am cautious by nature but credit of any kind that makes a purchase easier does tempt us into making a more spur-of-the-moment or more expensive purchase, whereas parting with cash from my wallet made me think harder – do I really need to buy this? And, of course, the cash was real money I had saved up. A cheque book had a similar effect. Now I use a credit card mainly for free credit; I pay it off in full every month. The upside of credit cards is convenience, particularly with the internet. But they require self control, and whilst we can blame the banks for introducing them it is we who use them.

We use debt all the time. The classic is the mortgage, which often gets overlooked; who could possibly aspire to a home of their own without incurring debt? But if we miss enough payments we lose our home – we cannot normally blame the lender when that happens.

I cannot understand why, when people have the opportunity to avoid the high charges, they don’t arrange an overdraft facility. particularly if they’ve once had their fingers burnt. That is surely the place to start. If they are not a good credit risk then the bank should simply not allow them to overdraw. Is that not a simple solution?

I enjoyed reading several articles on psychology today.com, which are easy to understand and relate to.

I am reminded of a friend who died ten years ago. I got to know him because of a shared hobby interest. He was an avid collector and had a bigger collection of OS maps than most bookshops. That made some sense because he did a lot of travelling and used maps regularly, but somewhat eccentrically he also had a large CD collection long before he had a CD player, largely thanks to Britannia Music and other mail order companies that existed at the time. He also had many box sets of video tapes but could not afford to buy a player that worked reliably. At least he could enjoy his growing book collection, and he was an avid reader. He spent a fortune on car repairs and would eventually buy another old car. He would never fill up the tank of his car and frequently ran out of petrol. In most other respects he was normal person and helpful to me and his many other friends. He and his wife had savings but he was paying substantial interest to his credit card companies or bank every month. He knew that if he stopped spending money on unnecessary purchases for a few months he could clear his debts and have more money to spend. It never happened.

Wavechange, I was very interested to read about your friend who was obviously fulfilling a deep seated need of his own by gaining material pleasure from his collections. He was, I would surmise, a spender who was extremely fortunate to have a wife who was a saver. I was once married to an extrovert spender whose hobby was collecting credit cards! When one card had reached its spending limit, another would be used to enable him to continue his spending and his very expensive lifestyle , and then another ad infinitum………

I recall that he did pay the household bills because I remember him saying that he waited until the red ones arrived. His wife worked for a local hospice and I don’t know if she had an income. It looked like continuous but controlled debt. He gained pleasure from his maps and books but much of the other stuff cluttered up their home and garage. When I first knew him, everything was meticulously organised, especially his extensive photo collection, but that went downhill as his health deteriorated. I know materialistic people with expensive cars and boats but he was not one of them. He had a decent house in a nice area, and I assume that he had just become accustomed to living in debt. Improvements such as replacement windows were done a couple at a time – hardly a good way of getting value for money.

I vaguely know a couple of other people who have struggled financially. One couple was forced to sell their house when they could not make ends meet and they now live in rental property on benefits. I know of someone else who had little income and was living in rental property. She told me that she had become bankrupt and looked forward to having a fresh start. Having heard other tales of people I don’t know, I’m convinced that debt problems are many and varied. Whether they are genuine hard luck problems or simply lazy people who don’t manage their money, I don’t think they deserve high interest charges so that the rest of us can enjoy free banking. Many of us are accustomed to paying nothing for banking services even if we keep a low credit balance. I wonder if anyone would like to justify this.

I don’t think it is high interest charges – my bank charges the same rate whether the overdraft is arranged or not. It is the fixed charges attached to unarranged overdrafts that seem to cause the most criticism, particularly when the overdraft is small.

My plea remains – encourage all who qualify to make the sensible move and arrange an overdraft facility if at any time it is possible you will overdraw. Then the other charges are irrelevant to you.

Just in case it is a factor, perhaps we should campaign to put an end to high interest charges. If the banks can provide evidence that their charges are reasonable I will reconsider but for the time being I will assume that they are being greedy. If we could do a Freedom of Information request we could establish whether the banks are being greedy or whether this is a popular myth. I have no reason to criticise my bank over how it handles my current account.