This is how much your overdraft limit should be, according to your age
I'll never forget being a naive, 18-year-old fresher, checking my bank account at the end of the month to see if I had enough money to go to the pub after uni.
Usually, after rent, splitting bills with housemates, and paying my gym membership from my part-time job, I'd be left with enough for a couple of pints.
Until one day, £2000 magically dropped into my Santander student account. Confused at first as to where it came from, these concerns soon transitioned into 'I'm rich,' when I realised my bank had 'gifted' me a lovely overdraft to spend at my leisure.
This, of course, was followed by a shopping spree at Beyond Retro, lunch in the Brighton Laines, and an afternoon sesh at East Street Tap. Looking back, I can see how silly my spending habits were and how dangerous they could become.
But with 2K casually landing in a few of my friends' accounts – during the height of summer – it was safety in numbers.
Thankfully, I managed to pay my overdraft off before the charges kicked in, which saved me a whole lot of future debt. It also forced me to become more responsible with money, focusing on saving it, rather than spending.
But the whole scenario got me thinking: what should your overdraft limit be, according to your age? Because at 18, a random and unasked-for £2000 doesn't seem like the brightest idea. Hopefully, almost a decade later, it's a thing of the past.
With this in mind, Metro spoke to Matthew Sheeran, money saving expert at Money Wellness, and finance specialist Pernia Rogers, founder of Your Finance Travel Buddy, to get the low-down.
To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video
'There's no one-size-fits-all answer to how much your overdraft limit should be, but we do see some patterns based on age and life stage,' explains Sheeran.
Rogers agrees, adding: 'A more practical approach is to set your overdraft limit according to your income, which usually grows as you get older.'
But for clarity, the pair have split these guidelines into age groups:
'If you're 18 to 24, your overdraft limit will typically be somewhere between £100 and £500,' says Sheeran. At this stage, most people are studying or just starting out in work, so they don't need or qualify for a large buffer.
If you're unsure of what bank account to go for as a student or young adult, Rogers says that many student accounts offer interest-free overdrafts of around £500.
'These can be useful if managed carefully, but it's important to treat it as a buffer, not free money,' she warns. If only I'd had such advice back in the day.
According to Sheeran, this is when we expect to see limits rise to around £500 to £1,000. 'As people's income increases, they start taking on more financial responsibilities like rent or bills,' he states.
Rogers elaborates: 'Early in your career, between the ages of 25 and 30, when your income is more stable, banks may offer larger overdrafts.'
However, the expert still urges you to be sensible. Rogers says it's a smart idea to limit your overdraft to about one month's salary and only use it in emergencies.
By the time people are in their late thirties or early forties, their overdraft might be as high as £1,500, Sheeran reveals. But ideally, it's used only for unexpected costs, not everyday spending.
The amount is likely increased to this level due to higher earnings and the expectation that people this age are more financially mature. Meaning, they typically refrain from splurging on superficial purchases. More Trending
Once you're older – around the 30+ age – and more established, you'll have access to higher limits, explains Rogers. However, your overdraft should never be part of your regular income.
'Once people reach their mid-forties and beyond, it's common to see limits start to shrink again,' Sheeran says. He puts this figure at around £500 to £1,000, as people become both more financially stable and look to reduce their reliance on credit.
Overall, he says it's important to remember that your overdraft is still a form of borrowing, and if you're constantly in it, that could be a warning sign that something's not quite right with your budget.
View More »
'It's designed to be a short-term safety net, not a regular source of money.'
MORE: The 'unusual' way you can build your credit score as a renter — and make your money work harder
MORE: My credit score was so bad I couldn't get a phone — now I'm a homeowner
MORE: Map reveals the UK loan hotspots where people borrow the most money
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Metro
3 hours ago
- Metro
What is Nigel Farage's £250,000 Britannia card and how would it work?
To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Nigel Farage has announced a big idea to shake up the tax system if his Reform party ever get into power – and it's all centred around what he calls the Britannia card. The so-called 'card' is really a deal with wealthy foreigners and British expats who want access to a bespoke tax system that could save them money. There would be a hefty price tag attached to this agreement though: a one-off payment of £250,000. Under Farage's plan, that money would then be redistributed to some of the country's lowest-paid workers in the form of an annual payout. Labour have argued the arrangement would end up leading to tax hikes on working families, as the government would miss out on funds it would have got from people who choose to buy the card. Here's what would happen under the system proposed by Reform. Craig Munro breaks down Westminster chaos into easy to follow insight, walking you through what the latest policies mean to you. Sign up here. The Britannia card is a snappy name given to the new tax plan suggested by Nigel Farage and his Reform party. It aims to stop wealthy non-doms – people whose permanent home is outside the UK for tax purposes – from leaving the country, while also boosting the income of the poorest. The offer is simple: pay a one-off fee of £250,000 to the government and they won't be taxed on any wealth, income or capital gains earned abroad. They also wouldn't need to pay inheritance tax. Holders of the Britannia card would still need to pay tax in the normal way for any income and gains earned in the UK. The second part of the plan is even more radical. All the cash collected from those one-off fees would not go towards public services like the NHS, police or schools: instead, it would be sent directly to the bottom 10% of UK earners. In effect, it's a form of 'Robin Hood tax', taking money from the rich and redistributing it to the poor. According to Reform's sums, if 6,000 non-doms paid for a Britannia card each year, that would give a £600 income boost to 2.5 million of the lowest-paid Brits. In a press conference today, Farage responded to a description of his wealth redistribution plan as 'profoundly left-wing' by saying that 'could not be further from the truth'. He argued: 'We're saying we want people who make loads of money to come in to Britain in huge numbers and pay lots and lots of tax and buy lots of houses and spend lots of money.' But Labour said non-doms would only pay for the card if the fee is less than the amount of tax they already pay, meaning it would reduce overall tax revenues. A spokesperson said: 'As ever with Reform, the devil is in the detail. More Trending 'This giveaway would reduce revenues raised from the rich that would have to be made up elsewhere – through tax hikes on working families or through Farage's promise to charge them to use the NHS.' Analysis from Tax Policy Associates published this morning estimated the cost of the policy would be around £34 billion over five years. The group said it would discourage highly skilled professionals who cannot afford the £250,000 payment from moving to the UK, while also providing a 'very large and expensive tax windfall to a small number of very wealthy people who are already here'. Get in touch with our news team by emailing us at webnews@ For more stories like this, check our news page. MORE: MP admits getting staff member to put down his Labrador with a shotgun MORE: Reform UK chairman Zia Yusuf resigns after less than a year in role MORE: Defence Secretary says UK has 'lost control of borders' after 1,200 cross Channel
Reuters
3 hours ago
- Reuters
BBVA chair: potential sale of TSB by Sabadell has to comply with legislation
SANTANDER, Spain, June 23 (Reuters) - BBVA ( opens new tab Chairman Carlos Torres on Monday called for a clarification on the potential sale of Sabadell's ( opens new tab British unit TSB and said any such move amid BBVA's bid for Sabadell would have to comply with the Spanish legislation. His comments come after Sabadell last week said it had received expressions of interest in TSB, which analysts say could be a defensive move to ward off BBVA's ( opens new tab proposed 14-billion-euros ($16.06 billion) hostile takeover bid for smaller rival Sabadell ( opens new tab. The Spanish government is set to decide on Tuesday whether to impose additional conditions on BBVA's offer before giving it its approval. ($1 = 0.8715 euros)
South Wales Argus
3 hours ago
- South Wales Argus
All the UK Santander bank branches that will close this week
The closures are estimated to put around 750 jobs at risk and the Spanish-owned bank will also cut hours across 36 sites and switch 18 to be counter-free. Santander said it will be left with 349 branches after the sweeping changes. This week, a handful of those branches are set to close across the country – see the list. All Santander bank closures happening this week The following Santander branches will close this week: Monday, June 23 Blackwood, Gwent, Wales Cleveleys, Lancashire Eltham, London Glasgow MX, Lanarkshire Tuesday, June 24 Aberdare, Glamorgan, Wales Glasgow LDHQ, Lanarkshire, Scotland Greenford, Greater London Wednesday, June 25 Brecon, Powys, Wales Thursday, June 26 Peterhead, Aberdeenshire, Scotland Santander said the changes are being made as customers increasingly switch to online banking with it citing a 63% surge in digital transactions since 2019 while branch transactions have slumped by 61% in that time. A Santander UK spokesman said: 'As customer behaviour changes, we are ensuring that our branches remain fit for the future. 'Our new combination of full-service branches, alongside work cafes, counter-free branches and reduced hours branches, aims to provide the right balance between digital banking and face-to-face money management and guidance.' He added: 'Closing a branch is always a very difficult decision and we spend a great deal of time assessing where and when we do this and how to minimise the impact it may have on our customers.' Santander said that from June 30, the majority of the reduced-hours branches will be open three days a week – either Mondays, Wednesdays and Fridays from 9.30am to 3pm, or Tuesdays and Thursdays from 9.30am to 3pm and Saturdays from 9.30am to 12.30pm. Recommended reading: The bank announced in March that it would change 18 sites to being counter-free from June 16 but stressed they will also be manned by staff to offer face-to-face support with an average of eight workers in these branches. The group will be recruiting 95 new 'community bankers' in the locations where it is shutting branches and hopes to redeploy some of the affected workers into these jobs. They will visit local communities on a weekly basis, based in centres such as libraries and community halls. Is your local Santander branch closing? Let us know in the comments.
