Women and under-35s most likely to use overdrafts
Alliance Trust Savings surveyed 2,000 investors with personal income of at least £35,000 or a household income of at least £60,000, plus some level of household savings.
The week before payday is the most vulnerable. Overall, 24% of women tend to go into their overdraft each month, compared to 15% of men.
Use of overdrafts is also more prevalent among younger people: 29% of 25-34-year-olds regularly use an overdraft, rising to 32% among women in this age group, compared to just 11% of those aged 55 or more.
Regionally, men from London are the least likely to go into overdraft, with nine out of ten (89%) never doing so, while women from Scotland are the most likely, with a third (31%) using one. Two percent of both men and women surveyed are always overdrawn as their income does not clear their overdraft.
Sara Wilson, head of platform proposition at Alliance Trust Savings, said: “Even among this relatively affluent audience, overdrafts are still an important tool for regular spending, with a fifth of respondents using them at some point during the month. Although reliance on overdrafts falls as we get older, one in ten aged over 55 are still using them regularly. Perhaps most surprising is that two percent of both men and women surveyed are always overdrawn.
“Understanding how to budget and balance your income with your outgoings is a crucial skill and becomes more important in later life when income from working needs to be replaced with income from savings.”
Overdrafts are generally one of the most expensive form of borrowing. Barclays and Santander charge 75p and £1 per day respectively for authorised overdrafts, while Nationwide, TSB and NatWest charge 18.9%, 19.84% and 19.89%. First Direct offers the lowest rate at 15.9% (source: USwitch). This compares to loan rates starting at 2.7% (Sainbury’s Bank).