The cost-of-living crisis has been mentioned many times in our previous articles, and it’s clearly another big issue that has plagued people in the wake of the pandemic.
The latest news that the banking industry has withdrawn unused overdraft facilities for savers in recent days means that an important line of defense against the cost of living crisis has been hit hard.
So far, Barclays has signalled some checking account holders that some credits have been withdrawn after they have not been used for more than a year.
About the Overdraft
An overdraft limit is a common way of borrowing today that allows customers to pay more than they currently have in their accounts.
The bank will send the account behavior information to the credit investigation agency and calculate the amount of overdraft available.
The biggest change now is that even if you previously had large overdrafts but you never used them, the bank will take back the unused limit and notify customers one month in advance.
What People Think about Overdraft
After the announcement, many savers said they had planned to use the overdraft to pay their winter gas bills, but the news has undoubtedly sent people into despair again.
Other depositors who had been notified wanted to hold off on their decision to withdraw their unused credit by contacting their bank. Unfortunately these negotiations did not go well enough that they had to face the reality.
We’ve heard from some of the bank’s loyal users who are also complaining and say there isn’t any feasible way to restore the limit to preserve the best bottom line.
What’s the Bank’s Explanation?
Banks say they have been protecting customers from unbearable debt pressures since the review last year.
In other words, banks are reluctant to see customers saddled with so much debt that they end up being unable to pay them back.
Therefore, the overdraft limit was narrowed from the beginning to limit customers from overdrafting more.
According to the Guardian interview with the chief: “In fact, every year banks review customers’ overdrafts and remove unused credits.”
Will Lowering Overdraft Limits Spread?
Wealth management experts believe it will become more common to cancel unused overdraft facilities as more banks are affected.
This phenomenon will not be just one bank, they will readjust their strategies to ensure the stability of the economic situation.
Some opponents say banks rushing to cancel customers’ unused overdrafts will put customers in debt, which is absolutely undesirable as millions of households are still struggling to make ends meet.