I have had an arranged overdraft with my bank for decades, and have been in the very fortunate position to never having the need to use it.

I got a letter today saying they were reducing the rate from 50% EAR (!!) to 40% EAR. Am I missing something?? (I believe EAR stands for Equivalent Annual Rate). Inflation is currently hovering at around 2%.

Is this just an example of why 'banking' holds so much disdain in many of our hearts?

24 minutes ago, StephenFord said:

I have had an arranged overdraft with my bank for decades, and have been in the very fortunate position to never having the need to use it.

Likewise, but my bank "only" charges 35%.😀

Banks don't want people using an overdraft.  They were designed for short term emergencies.  But then people started living in them permanently.  That means the bank has less money to invest for profit.  They'd much rather people used credit cards for borrowing instead.

9 minutes ago, TomsFocus said:

...They'd much rather people used credit cards for borrowing instead.

Aahhh yes, they charge a more reasonable annual interest rate of only 20%, 18% more than inflation, and 19% more than they can borrow from the Bank of England LOL

Banks used to charge fixed fees, maybe £12 as you first use it, then a daily charge.

This was stopped by the FSA, banks were forced to just use a simple interest rate. This meant most went with a very high rate to compensate as most people only use a bit of it and they'd otherwise have lost out on their fees.

5 minutes ago, StephenFord said:

Aahhh yes, they charge a more reasonable annual interest rate of only 20%, 18% more than inflation, and 19% more than they can borrow from the Bank of England LOL

True.  But they are a business at the end of the day, not a charity.

My bank Natwest, years ago offered what they called a PinkZone which i took advantage of for major purchases. £6.00 per charging period plus interest works out cheaper than taking out a loan or the embarrasment of being declined. They tried to take it off me years ago as i didnt use it. I kicked up a fuss and kept it. It kind of forces you to think twice about some purchases and to repay ASAP.