August 16, 2022
Barclays Strips Customers of Overdrafts Amid Cost of Living Crisis
Barclays customers who have not used their overdraft in a year have been told they have just one month before the facility is removed.
Overdrafts can offer current account customers financial leeway if they are struggling with their finances, as many are during the current cost of living crisis. Experts criticised the move and said more households would need financial support in the coming months as energy bills and food prices soar.
One Barclays customer voiced his frustration on social media after the bank told him his overdraft was being revoked. “I have explained to Barclays that just because you haven’t used [your overdraft] for 12 months, doesn’t mean you don’t need it as a safety net or a lifeline,” he said.
Once the overdraft is withdrawn, if a payment takes an account into the red, Barclays will block the transaction. This could result in priority bills going unpaid.
Dorel Blitz of financial data company Personetics said “overdrafts act as a crucial safety net for millions of banking customers in case of any unexpected changes in their financial situation” and added that overdrafts would “only get more important” as the cost of living crisis deepens.
More than one in 10 people report using credit such as overdrafts more than usual because of rising outgoings, according to the latest data from the Office of National Statistics.
Barclays said it had been reviewing customer overdrafts since last year. A spokesman for the bank said: “We review all personal arranged overdraft limits at least once a year, taking into account all the financial information we have about each customer.”
The spokesman added: “Where this suggests that a personal arranged overdraft limit may be too high, we’ll plan to reduce it to a lower limit, taking into account how much of the overdraft has been used over the past 12 months. If the overdraft hasn’t been used at all for a long time, we may remove it.”
Barclays said it had not made these changes due to the cost of living crisis. However experts said the decision to remove overdrafts suggested the bank believed more of its customers will struggle to meet repayments.
Barclays said it was giving customers “sufficient notice” to allow them to respond to the change. “If customers feel they are able to afford their current limit, they will need to provide additional information to confirm their income and expenditure,” the spokesman said.
But Mr Blitz said: “The decision from Barclays just reinforces how British families aren’t getting the support they need from their banks.”
Peter Tutton of StepChange, a debt advice charity, said: “If you’re worried that a decision by your bank may impact you financially, the best thing to do is to speak to them. But with growing pressure on household budgets it is important that banks and other lenders are also on the front foot to offer help to people showing signs of financial difficulty.”
Originally published on The Daily Telegraph By Charlotte Gifford, 15 August 2022: https://www.telegraph.co.uk/personal-banking/current-accounts/barclays-strips-customers-overdrafts-amid-cost-living-crisis/
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