Reply to: overdraft fees

[d000hg]

5% on £5k per year cash ISA isn't worth my time. If it was not limited to such pityful amount then it would be fine though.

Surely you have £5k from each previous year plus all the cumulative interest AtW? You should have loads of cash in your ISA.

[AtW]

As far as I know, the 5% ones require you to lock up your money for years! And Im talking 5 years, not 2.

d000hg thinks it's a smart investment ...

[escapeUK]

5% on £5k per year cash ISA isn't worth my time. If it was not limited to such pityful amount then it would be fine though.

As far as I know, the 5% ones require you to lock up your money for years! And Im talking 5 years, not 2.

[AtW]

If 5% is not worth having on your investments, you're too stupid to have investments.

5% on £5k per year cash ISA isn't worth my time. If it was not limited to such pityful amount then it would be fine though.

[d000hg]

...

An overdraft is useful as a short term bridging loan... a few days a month if you income/outgoings dates don't match up nicely. Otherwise I agree it's a bad thing.

[d000hg]

If 5% is not worth having on your investments, you're too stupid to have investments.

[AtW]

5% in an ISA, 8% not.

So, locking in just a few grand a year for 5% and where 8% comes from - real estate in Dubai?

[d000hg]

What is the interest currently on those "high interest" accounts you mention?

5% in an ISA, 8% not.

[wim121]

I would say an overdraft is a sign of bad financial planning (stupid) rather than lack of money (poor).

Sometimes it can be someone who is a little poor at that moment, someone who is 'stupid' or a mixture of both.

Surely those who pay huge percentages in overdraft fees should be grateful to the banks for pointing out how stupid they are?

No offence BP, but I think that is of a bit short sighted view on this subject.

Overdraft fees are ridiculous. All they do is lock the victims in to an endless cycle. Appropriate rates are sensible to cover the debt, but adding hundreds of pounds of fines on per transaction, then idiotic interest locks victims in to an endless cycle.

We once got in to a bad overdraft, when the OH needed an operation and had to miss work, dropping down on her salary and I had to take time off to be with her. Even dipping slightly in to an overdraft then meant the next month, while we could skimp by and technically earn more than we spent, after paying off all the fines, we were back in the red. We nearly got stuck in that hole permanently like we have seen others get stuck in.

It isnt just the "I want" mindset this affects but more people than one might think. Sometimes it isnt poor financial planning or spending more than you earn, sometimes it can be set off by a chain of events like illness and a bigger than normal bill one month then 'bam'.

[AtW]

No it's not. The optimal strategy is to have the absolute minimum in current accounts and move money into those accounts as needed, so you get maximum interest on your high interest accounts.

What is the interest currently on those "high interest" accounts you mention?

[Doggy Styles]

I took out a very large overdraft to buy a house.

[d000hg]

Who still uses a cheque?

People buying second hand cars. People over 40.

[d000hg]

No, that's not good financial planning - that's being very very stupid.

No it's not. The optimal strategy is to have the absolute minimum in current accounts and move money into those accounts as needed, so you get maximum interest on your high interest accounts.

BUT, such a strategy is far less error-resistant.

When you have enough money for more than one account you'll learn these things

[Diver]

I sometimes go into my overdraft

But then again it's usually because I've forgotten to transfer money into the account

I'm quite often guilty of poor financial planning and money mismanagement.

Today I blocked one of my credit cards while fuelling the car in Portland; I put the pin in for one of my other cards - three times. Note to self, must call and unblock it

Reason I wasn't using my debit card was I'd forgotten it and left it in Wales
See, Totally financially challenged

[SimonMac]

Good financial planning means you typically have little in a current account, therefore it's easy to stuff up.

Example 1 - I had written a cheque A for £1000 from account A and I paid in a cheque B for £2k to account B before cheque A was cashed. The money showed up on Account A immediately but I couldn't move it until it cleared, 3 days later - in the meantime cheque B was cashed and I ended up overdrawn since I don't keep that much floating in the current account.

Example 2 - I knew my credit card was near the limit before we went on holiday and wanted to make sure we had credit available abroad. So I made an additional payment of a few £k. Only to find they didn't automatically take this off the balance, but proceeded to try and take the full amount from my account which was now empty after paying out several £k... hence my credit card company tried to charge me for failing to pay them, and my bank tried to charge me for a failed payment.

The more carefully you plan things, the easier you can stuff it up... keeping all your cash in one account would be far easier

Who still uses a cheque?