Wednesday 16 April 2014

Is Your Overdraft Good Value for Money?

Whether we like it or not, Kiran Trivedi readers, we all occasionally need to dip into our overdrafts to balance the books. But is your overdraft good value for money? Well according to the Financial Conduct Authority (FCA), it isn’t.

The thing about overdrafts is that no one wants to dip into them; it leaves you owing money and unless you have a student or post graduate overdraft, you’re most likely going to have to pay a charge for that service. However sometimes you have to, just to make it through the month. But is your overdraft leaving you worse off?

Overdrafts “Complex and Opaque”
The FCA has come out this month and put the whole lender overdraft culture into the spotlight, by suggesting that it is “complex and opaque.” What they mean by this, is that they are hard to understand, which means that because customers don’t necessarily understand the rules, they are vulnerable to losing money.

They’ve estimated that customers have lost in excess of £8 billion to banks and building societies through complex overdraft rules, and now the financial body has decided to launch a deeper investigation into the issue over the summer. Watch this space to see how it plays out.

The FCA has been reported to have said on the issue by news sources that: “Even the most astute consumer could struggle to understand what they are paying for" when it comes to an unarranged overdraft. So what should you do to tackle this problem?

Kiran Trivedi’s Guide to Handling Overdraft Issues
As long as you stay informed and you keep on top of things, there’s actually quite a few things to control the situation with your overdraft. These are:
  • Research: Before you agree to anything, do your research. It’s a very competitive market out there at the moment, especially with the economic recovery,  and if you look around, you’re sure to find the right overdraft option for your personal finances
  • Read the Fine Print: Lenders don’t exactly like to advertise the more unpleasant parts of their overdraft facilities, so they’ll usually stick it all in the fine print. Make sure you read carefully before you sign.
  • Budget: An overdraft really should be a last resort; you shouldn’t be dipping into it to fund things like shopping sprees. Carefully budget so that you only need to use it in cases of emergency.
  • Get Help: If you think you’ve been hit with unfair overdraft charges, and the bank are ignoring you, contact the FCA. Now is literally the perfect time, as they’re actually investigating the matter. 

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