Bank has reduced my overdraft limit

R

Rose65

Well-known Member
Location
United Kingdom
Ok, I have never gone overdrawn in many many years, but I still feel a bit shocked. I got a letter recently from my bank saying they have greatly reduced my limits on each of my accounts. I always felt secure that if I ever needed money for an emergency, I could go overdrawn temporarily with a good safety net.

They have never sent letters like this before. For some reason I feel a bit put out! I hope they don't reduce my credit card limit too. Is this a new policy , is it for security and has anyone else received such letters?
 

With my bank ... a member since 1988 ... I applied many MANY years ago for their overdraft limit. Basically I can write myself a loan in an emergency for up to $5,000. However, any unpaid monthly overdraft balance is subject to interest charges. My credit rating hovers between 824 and 845, so I don't see them reducing the overdraft limit. With that credit rating, everybody wants me to borrow and charge more :oops:

Seldom have I ever used that overdraft feature. Maybe once or twice in the 36yrs I've been a member. And always paid the overdraft off before interest charges hit.

Overdraft is a nice to have but as @Muskrat stated, there are alternatives. And often they are a cheaper option than overdraft.
 
Many years ago my wife had a Citibank MstrCard that she hardly ever used. First they lowered her limit, then after not using it for 3 years they cancelled her card. Now she keeps getting a 'Please Comeback' mailing from Citi. Wanting her to reapply. She is what the CC companies call a 'deadbeat' never carried a balance &/or paid her bill 100% monthly. She gets at least one ad mailing a week. Probably has used up one tree.
 
This, along with online purchases, is what I feel credit cards are good for. Relying on overdraft protection is... nuts.

I never carry balances on them though, at least not since digging myself out of a hole subsequent to divorce. For a "deadbeat" I get pretty decent interest rates, have never paid a fee to keep them open, and I get buried in junk mail offering me more of them.

Being able to manage your finances and maintain an excellent credit score is a simple exercise in prudence. The "secret" if such a thing exists is probably just to buy less than you can afford. Not everything you can afford or worse.

How many people even know and monitor their credit scores?

Balance transfers can also be a trap. Understand the terms, and preferably avoid it unless you are getting a substantial deal as part of opening a new account.
 
My credit union had my checking linked with my saving account, without my knowledge and against my wishes. When my checking account got hijacked the checking account would go into overdraft, and the credit union would automatically draw from the savings, plus a substantial overdraft fee. I just happened to discover this on a random checking account balance inquiry, by that time thousands of dollars had been siphoned out of my accounts. Everything got straightened out and re-reimbursed, but I had to specifically instruct the credit union to NOT link my checking with savings, as they had done it again. :rolleyes:
 
Rose65 said:
Ok, I have never gone overdrawn in many many years, but I still feel a bit shocked. I got a letter recently from my bank saying they have greatly reduced my limits on each of my accounts. I always felt secure that if I ever needed money for an emergency, I could go overdrawn temporarily with a good safety net.

They have never sent letters like this before. For some reason I feel a bit put out! I hope they don't reduce my credit card limit too. Is this a new policy , is it for security and has anyone else received such letters?
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I asked chatgpt why a bank would do that, and in short (it first gave long detailed explanations of each benefit to the bank) this is what it said: "reducing customers' unused overdraft limits can help banks manage risk, improve regulatory compliance, enhance liquidity and profitability, promote responsible customer behavior, and streamline operations"
 
After thinking about it a little more, I'm leaning toward thinking it is due to this part:
"
  1. Improved Regulatory Capital Ratios: Banks are required to hold a certain amount of capital against their outstanding credit exposures, including unused overdraft limits. Reducing these limits can improve a bank's capital ratios, making them more financially stable and better able to meet regulatory requirements."
I think this might be a significant factor for them reducing your limits, because I've read that with the current high interest rates people aren't keeping as much in their bank savings accounts because they make more interest keeping it in high-interest-rate accounts instead, so the banks have less money on hand. And I know that is true for me because I used to keep several months money in my savings account, but now I keep my next several months money in a money market account at Fidelity that is paying approx 5%, and only keeping 1 months money in my bank savings account that pays a pitiful half a percent.
 
Rose65 said:
Ok, I have never gone overdrawn in many many years, but I still feel a bit shocked. I got a letter recently from my bank saying they have greatly reduced my limits on each of my accounts. I always felt secure that if I ever needed money for an emergency, I could go overdrawn temporarily with a good safety net.

They have never sent letters like this before. For some reason I feel a bit put out! I hope they don't reduce my credit card limit too. Is this a new policy , is it for security and has anyone else received such letters?
Click to expand...
I only belong to credit unions. I heart them.

Who is it? Chase? Wells Froggers? Bank of Arrestyourselves? J.P. More-more-more-gan?
 
Roadwarrior said:
Many years ago my wife had a Citibank MstrCard that she hardly ever used. First they lowered her limit, then after not using it for 3 years they cancelled her card. Now she keeps getting a 'Please Comeback' mailing from Citi. Wanting her to reapply. She is what the CC companies call a 'deadbeat' never carried a balance &/or paid her bill 100% monthly. She gets at least one ad mailing a week. Probably has used up one tree.
Click to expand...
Yes I had the same thing with a card company a few years ago... I was saving that card to use for a particular high price reason, so didn't use it for anything else.. then the CC lowered my limit to just £2k..then 1k within 6months.. which made the card unusable for the reason I had it.. then to a pittance of £500...

I never used the card.. and the would never apply for a card with that C-company again for that reason.. and they missed out on me using it for a Big purchase, and the repayments on that. Goodness knows how many other people they did that to... and I have never made a late payment on any Card.. my credit is squeaky clean, so to this day I have no idea why they did it..
 
My bank used to have overdraft protection for those who wanted it, then made it mandatory for all customers. There is a lot of credit card debt in the U.S. at present. :confused:
 
Banks are also reducing Credit Card limits. In the event of a downturn in the economy they are trying to limit their losses when people stop paying up and file for bankruptcy. I would rather they cut my charge and over draft limit then ask the government to pick my pocket again to bail them out.
 
hollydolly said:
Yes I had the same thing with a card company a few years ago... I was saving that card to use for a particular high price reason, so didn't use it for anything else.. then the CC lowered my limit to just £2k..then 1k within 6months.. which made the card unusable for the reason I had it.. then to a pittance of £500...

I never used the card.. and the would never apply for a card with that C-company again for that reason.. and they missed out on me using it for a Big purchase, and the repayments on that. Goodness knows how many other people they did that to... and I have never made a late payment on any Card.. my credit is squeaky clean, so to this day I have no idea why they did it..
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Me too, I pay off regularly. In fact I have a direct debit they pays the minimum amount every month as a safety net. I am very cautious. I hope they don't reduce my limit.

It's just disconcerting really. I wish they had asked me, given me the choice.
 
I don’t know if I have overdraft protection on my checking account or not, but I think that I do. I am pretty careful to stay in my budget and keep enough extra in the bank. I use a credit union, and not a regular bank, and have used the same one for years. One of the things it shows is a person’s FICO score, so I monitor that along with everything else in my account, and I pay off the credit card every month.
 
jujube said:
I'm tired of being "penalized" because I pay off all of my bills every month. My credit rating hovers at 815, which is perfect for anything I need, but why isn't it....uh....1000? (I know, I know, it doesn't go that high.)

There should be some kind of reward for people who pay their bills and pay them on time. Hmmmphhh.
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Well the banks aren't going to reward you (us) because we pay off our balances each month. We are literally costing them money by not paying interest. But good for you...815...I'm impressed! Over the past year, mine has dropped from 812 to 804, but the factors that caused that. Isn't it crazy that not having an unpaid loan negatively impacts our credit scores?!

Rose, I just hope you are never in a situation where you need overdraft protection. I have it on my accounts "in case" too, but keep more than enough in them. The only time it was used was when the bank I use for Cash App (CA) screwed up and declined a deposit from which I had scheduled a transfer to my main bank. The transfer was even scheduled for the next day, not the same day. Then the bank had the nerve to charge me $15 after issuing a new policy stating that no fees would be charged on overdrafts if the funds were replaced in 24 hours! I had transferred the necessary amount from my savings with them within 13 hours.

I was quite annoyed and went to the branch to straighten it out. After the agent helped as much as he could, he gave me a number he said I had to call to finish the process. The CA funds were deposited and the bank credited the $15. But these things never should have happened in the first place.
 
A banker tried to set up overdraft protection on my account, but as I understood it (or didn't understand it), it was at the bank's discretion to pay it or not. That didn't make any sense to me. I might have set it up. I don't remember, but I hope to never use it.

On my other accounts, my overdrafts go directly to my credit card. I've never done it, so I don't know how it works, but that's how it was set up.
 
Overdraft makes it easier for criminals to drain your account and get more than is in the account. Avoid it.
 
My first thought. Why would anyone want an overdraft limit, or care if it were changed. It about the same as usury. I have lived by the idea that one of the healthy savings plans is to become debt free and stay that way. I use credit cards but pay them in full each month. It's just a little safer than carrying cash. I don't think I write more than two or three checks a year.
 

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