People who regularly use an overdraft are more likely to be in debt and should seek alternative debt solutions, one charity has suggested.
The Consumer Credit Counselling Service (CCCS), which offers independent advice for those in financial difficulties, has implied that people often use overdrafts to cover day-to-day expenses rather than in emergencies.
Spokesperson Tom Howard for the organisation said: “While overdrafts shouldn’t be avoided altogether, CCCS would however never recommend that overdrafts should be used as a regular means of credit for consumer use.”
Other forms of credit could be more viable, he added, and those becoming over-reliant on their account should consider getting debt advice from agencies such as the Citizens Advice Bureau.
A recent survey by price comparison site moneysupermarket.com has indicated that interest rates on overdrafts have increased by an average of 1.54 per cent since February 2008.
The results found that banks had been hiking the rates on overdrafts in contradiction to the decrease in the Bank of England’s base rate.
By Francis Finch