A bad budgeting habit

One bad habit I always revert to is sitting in my overdraft at the end of each month. Not by much,  less than £100 say.  An old habit from university days maybe?  It perhaps provides me with some nostalgia of more relaxed days.
The thing is I tend to ignore it. As (I think!) I am saving quite heavily I don’t get bothered by a few pounds in overdraft interest. The hassle of shifting money about to stop a few quid of interest paid doesn’t seem worth it.
By the same token I get excited when the interest I receive on savings goes up each month by far  less.  Why?

It’s just a quid
Halifax use this to their advantage, the clever beasts.  The overdraft on their current account is at only £1 a day. £1!  Who’s worried about £1. Not me…. until you actually think about it for a bit. 
The overdraft doesn’t start until you are £10 overdrawn, you get a £10 freebie.  Hoot!  So if we look at £10 and £1 overdraft interest a day, this is 10% a day or….. 3,600% a year.  Say what!?
As we increase the overdraft this rate reduces, but it takes all the way until we have a balance of around £2,000 overdrawn to get to normal overdraft interest levels of 19%.
Now 3,600% is a number that grabs my attention.  Christ, on £10,000 of savings that would leave me with £365k in a year or £13million in a couple of years.  Any one want to borrow £10?

Should I be angry at the bank for this?  Nah, I struggle to be.  They are lending me unsecured money with no fixed repayment date.  Besides the overdraft can be useful and I knew the terms up front.
What I am going to do is change my current account though, for one with an overdraft at a few hundred quid interest free.
What is interesting is that I have been going a few quid overdrawn towards the end of every month and accepting a £1 or two in interest without thinking about it.  In absolute terms it’s not enough to raise suspicions.  But in my other account that has a 19% overdraft I never go overdrawn, as 19% means more to me than £1.  
Time to reset a small part of my small brain.

Anyone have any of these mind blocks whilst saving?
Mr Z

3 thoughts on “A bad budgeting habit

  1. thefirestarter.co.uk

    Hey Mr Z!

    Came here from a comment on Mr Squirrels blog.
    A warm welcome to the FI UK blogging clan! 🙂

    I used to have a Halifax account and ditched it soon after they bought in this ridiculous overdraft system. It is such a bloody rip off!

    Not sure how good it is for overdrawn accounts but Santander 123 account is pretty good if you are in credit. We used is as our current account as you get a few quid cashback on your bills each month plus we use it as a "cash buffer" as you get 3% interest on balances over 3K, which isn't to be sniffed at, just in case you haven't opened up a new account yet! In fact I have a post up my sleeve on bank accounts soon so come over to my place and keep an eye out for it, and say hi with a few comments if you get time as well!

    Cheers and all the best!

  2. Mr Zombie

    Hey. Thanks for the welcome (and the other comments :).

    Yeah it is so expensive when you look at it as a % fee. Unreal!

    I will be interested in your bank account post, currently using the TSB and nationwide 5% interest on current accounts. Will def check it out.

    Mr Z

  3. M

    I second the vote on the Santander 123, you pay £2 a month for it, but you will more than make that back in cash back from bills, plus the interest rates mean you could use it as a1-3 month buffer account too



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