Commentary: Have you slipped into the red lately? Almost half of Londoners have used an overdraft in the past year, many more than the national figure of just more than a third.
Figures prepared for the Evening Standard by Moneysupemarket.com reveal that hard-up families are now being forced to use an overdraft regularly, with 3.5 million — or 45% — dipping into the red in the past 12 months.
More than a quarter ended up overdrawn within 15 days of having been paid, and 7% hit the red zone only five days after payday.
Frighteningly, some 620,000 Londoners — 8% — are permanently overdrawn, according to the research.
If you are living off your overdraft, you have problems. And the cost of going into the red each month might make it seem impossible to get your finances back on an even keel.
The short solution is to cut back. But on what? Most Britons dipping into the red will already have introduced cost-cutting exercises but now could be the time to get tough. The first thing to go, I’m afraid, are life’s little luxuries. Not altogether — that would be madness — but it may be time to tone things down a little. For instance, cancelling the occasional night out could save some cash, but isn’t going to improve your quality of life.
Instead think about the location. If you’re still hanging out at trendy Soho cocktail bars, it might be prudent to switch to a local bar where drinks will be cheaper and there’ll be no expensive cab home at the end of the night.
And how about charity shops? You can pick up some great retro fashion bargains, which could freshen up your wardrobe without breaking the bank again.
There are plenty of other examples of how being austere for a few months could put you back into the black.
Not least is the notion of changing your bank to one that suits your lifestyle better. Someone who permanently uses a £500 overdraft could be paying almost £200 a year more than they need to by using the wrong account, says Moneysupermarket. If you’re constantly in the red consider the Nationwide FlexAccount, for instance. It charges 18.90% on authorised overdrafts, costing £93.60 per year.
If you only go overdrawn from time to time, there’s Halifax’s Reward Current Account. It charges £1 per day for overdraft balances under £2500.
