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Many people permanently in the red with overdrafts

July 31, 2007 by admin  
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A recent report has highlighted that by the 20th of each month many Brits find themselves running out of cash and having to rely on their overdrafts to see them through the rest of the month until payday.

debt-women.jpgIn some cases, once payday comes around, Brits are able to slide back into the black for several weeks. However, there are also many Brits that will go straight back into the red, even after their salary has been paid in, because their accounts are permanently overdrawn.

Around two million consumers in the UK are always in the red, unable to pull themselves out of their overdraft debt and therefore having to rely heavily on their overdraft facility. In the past year, according to research, around ten million people in the UK have used their overdraft on at least one occasion. Rising interest rates and repayments may have contributed to this figure, with more and more people having to dip into their overdrafts in order to stay afloat due to rising repayments.

One industry professional stated: ‘It’s no surprise so many people are permanently in the red – with interest rates having risen five times in the past year consumers are not doubt feeling the squeeze. People often dipping into their overdraft need to watch the Effective Annual Rate as some can be punitive and they may find they are better off spending on a 0% credit card in the future.’

Those aged 55 years and over were found to be the best at staying out of the red, with an impressive 64% in this age group managing to stay in the black. This compared to 40% of 18-24 year olds. In the 45-54 age group 5% were permanently in the red.

Tom Smith
31st July 2007

Tags: red, credit, current, card, savings

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