Bank warns over ‘easy credit’

Through the introduction of an annual review of overdrafts, HSBC’s action could cut down on the amount of people regularly using overdrafts as loans.

“Overdrafts were originally developed to give customers a safety net and more flexibility to cover short-term cash flow issues,” Joe Garner, head of UK personal financial services at HSBC, told This is Money.

“However, increasingly, people are regarding them as an extension of their salary and in doing so they are at risk of building up high levels of debt and paying too much for their borrowing.”

A crackdown on overdrafts follows news that bad debt cases at banks have soared and action is taken to stop this level increasing.

Mr Garner added that he feels that customer attitudes towards debt needs to change, but the bank will communicate to its customers about alternatives to overdrafts.

However, by taking advice on debt management, many people could be able to avoid the need for both overdrafts and loans.