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Will your overdraft last until January pay day?

Wednesday, 13 January 2010 Writes Hazel Cottrell hazel.cottrell@consumerchoices.co.uk

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Speak to your bank now if you are worried about slipping over your overdraft limit this January, warns expert.

Brits who were paid early in December may struggle to avoid going over their overdraft limit this January.

Arranging a temporary increase for a couple of months could save you from some crippling bank charges.

Andrew Hagger, of financial website Moneynet.co.uk, warned that people could see their New Year get off to a bad start if they get caught out with unauthorised overdraft charges.

Instead, he advised: “If you think you could do with a little more financial breathing space, contact your bank or building society and arrange an authorised overdraft to tide you over.”

Unauthorised overdraft charges vary significantly between banks, with some charging daily, some monthly and some doing both.

For example, if your bank agrees to pay two £75 cheques on the same day that take you £150 over your limit for seven days, you could be charged anywhere from 57p (by HSBC, if it’s the first time you’ve gone over your limit in the last six months) to £155.54 (by Lloyds TSB).

Hagger stressed that the cost of an authorised overdraft is a mere fraction of the cost of unauthorised borrowing.

He said: “Arranging a temporary increase for a couple of months whilst you get your finances back on track could save you from some crippling bank charges.”