Overdraft debts – key issues and your options

October 10, 2014

An overdraft facility is a very common means of gaining financial flexibility either as an individual or as a business and they essentially mean a bank account holder can spend more money than they have in their account at a given time.

Any money spent on the basis of an arranged overdraft will incur interest charges on a monthly basis but these are not generally at a level high enough to cause serious financial concerns. Where use of an overdraft can become a source of debt management problems is in a situation whereby these facilities are being dipped into without authorisation.

Unauthorised overdrafts

Using an overdraft on an unauthorised basis can cause debt problems because your bank account provider will generally hit you with charges for spending or trying to spend money that you don’t have, which is how such activities can be viewed. A one-off charge for unauthorised overdraft use won’t usually be enough to prompt serious cause for debt concern but once an overdraft limit is reached there is a danger that these charges will be incurred repeatedly within a short space of time.

If you’re struggling with overdraft debts and charges then you’ll be familiar with the problems that can arise under these circumstances as direct debit payments are requested and rejected repeatedly, with bank charges being issued each time. This kind of situation can soon become very difficult to deal with, and escape from, as charges issued take a bank account user further and further beyond their agreed overdraft limit, which then makes it much more likely that additional charges will be incurred as well.

What to do if you’re worried about overdraft debts

The best policy if you’re finding it difficult to deal with issues relating to your overdraft debts is to communicate with your bank and explain the problems you’ve been having. Banks in the UK are obliged by the terms of the Lending Code to treat their customers in a sympathetic manner and, if their charges are causing you financial distress, they may be able to help.

Underlying issues?

Where overdraft charges cause serious debt problems they are very often caused by more underlying financial management concerns. So if you’re having trouble coping with the charges being levied against you as a bank account overdraft user then it could be that there are indirect ways of alleviating the issues.

Getting advice and guidance

Whatever the circumstances might be that have led you to the situation of struggling to afford your overdraft debts and charges, there are solutions to your problems available. In order to establish what aspects of your finances are most in need of attention you should speak to an expert on personal debt.

We at Scotland Debt Solutions can help put together a plan of action for dealing with your debts and the problems you’re having with your bank account overdraft issues. Try our Debt Solutions Questionnaire for a quick assessment of your circumstances.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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