Quarter of Brits in the red two weeks after payday
More than a quarter (27%) of Brits hit their overdraft just 17 days after payday, research has found.
Worryingly, more than one in five adults (21%) admit they reach their overdraft within just a week of payday, while 13% are in the red just a day after they get paid. One in a hundred are overdrawn all month long, according to thinkmoney.co.uk.
Its research found that younger Brits are more likely to be overdrawn, with 50% of 18 to 24 year olds admitting they are in the red for at least part of the month, compared to just 22% of the over 55s.
Spokesman for Thinkmoney.co.uk Ian Williams said: "An overdraft should be a safety net, to help when something goes wrong. But it appears for many people being overdrawn has become the norm. In fact, many don’t regard it as a debt, but it is and spending most of the month overdrawn is a worrying position to be in.
"Whilst an authorised overdraft may be costly, an unauthorised overdraft could result in hefty charges and penalties."
The research comes after the news that wage rises including bonuses are at their lowest level since 2009. Average wages in March to May were just 0.3% higher than they were 12 months ago, while inflation rose to 1.9% in June, up from 1.5% in May, in an indication that Brits are still feeling a financial squeeze.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).