Overdraft Charges – Living in the red

Do you end every month at the limit of your overdraft? You are not alone. There are currently over 26 million UK overdraft users and unsurprisingly, most clients that we see face to face often rely on their overdrafts for everyday living. This can lead to a cycle of maxing an overdraft out, getting paid and then running the debt up again. Often, the salary is insufficient to clear the balance outstanding from the overdraft, so people are constantly living in the red.

Shockingly, fees and fines currently attributed to unauthorised overdrafts, mean that some cost the customer more than a Payday Loan.

In the face of these numbers, The Financial Conduct Authority (FCA) is implementing several changes that should made overdrafts simpler, fairer and more affordable. The new rules will be in force by 6 April 2020.

One of the major changes is that banks will no longer be able to charger higher fees for an unauthorised overdraft than for agreed ones.


Overdrafts were designed for short term or emergency use only, not as a regular source of income. When you go into an overdraft, you are creating a new debt – with all the fees this implies.

An arranged overdraft can help avoid fees from declined payments when your account doesn’t have enough funds. However, the FCA found that many customers underestimated their overdraft use, and therefore the level of debt they are in. It was also discovered that overdraft costs vary widely and can be confusing for the customer. This can lead to more debt in the long-term.

The Cost of overdrafts

According to the FCA, the typical cost of going just £100 into the red without permission was £5 a day – which the regulator expects to fall to less than 20p a day as a result of its changes.

What to do in the meantime

2020 is still a while away, and charges can accrue quickly. If you are constantly relying on your overdraft and living in the red, you may benefit from a financial review. We can help you to take charge of your finances, and end overdraft charges for good.

Please contact us on 0141 566 7038 or email contact@wyliebisset.com for further advice.