As More People Accumulate Debt Some Help With Overdraft Charges

The number of people amassing debt last year was up 27% compared with the previous year. This, coupled with the average debt of nearly £750 has led the Co-operative Bank to put a temporary hold on overdraft interest rate charges.

Interest charges will be put on hold for all Co-Operative Bank customers with an agreed overdraft, until the beginning of April 2012, providing some extra financial relief for customers.

This is a unique move in the banking industry.

Robin Taylor, Head of Banking at The Co-operative Bank comments: “In these difficult economic times, we want to offer a helping hand to those customers, who may be struggling financially, and give some additional support to those whose finances may be stretched after the festive period.

“This move again highlights how we are looking to bring some much needed competition to the high street,  by providing customers with a genuine alternative to the big five banks.”

People use a variety of forms to borrow money, including credit cards, personal loans and arranged overdrafts. A few use store cards or take out payday loans.

Whilst just over a quarter expect to pay bank their debts this year, of concern is that almost a third expect to pay back less than half and some 12% don’t expect to be able to pay off any of their debts this year.

With the help from the Bank, here are some top tips to help you start managing your debt.

• Prioritise your debts – if you have more than one debt, deal with vital ones such as utility bills, mortgages or council tax first. Your next priority should be the ones with the highest APR as they’ll cost you more in charges.
• Speak to your lender or bank. It’s in their interests to help you get back on track which means usually they’re happy to try and work out a solution to the problem. The sooner you do this the better and the more options you may have. 
• Check your credit rating – get hold of your credit file from any of the three main credit reference agencies (Experian, Equifax or Call Credit). A credit report costs just a few pounds but the information is priceless. Make sure the information is correct, if it’s not you can easily get it corrected – it’s important to do this as the incorrect information may be stopping you get credit. 
• Don’t ignore money problems – if you feel you’re in a lot of financial difficulty then act fast, the sooner you do the better. Contact the Citizen’s Advice Bureau, the National Debtline or the Consumer Credit Counselling Service and get some free, independent advice from the experts.

MoneyHighStreet comments: “This is a positive move by the Co-Operative Bank and will help those with an authorised overdraft – saving for example almost £75 in interest charges for those with a £2000 authorised overdraft.

“That said, spending beyond your means is not a good position to get yourself into. Going overdrawn or taking out a short term loan to deal with a cashflow problem is very different from having to borrow money that you cannot realistically pay back within an agreed period.

“If your need to borrow money is as a result of deeper financial difficulty you’re facing, that your outgoings are consistently exceeding your income, it may be time to take more structured action to tackle your debts, seeking professional debt advice if need be.”

As the infographic below shows, debt problems are UK wide and some 1 in 10 adults will not clear their debts this year.