Barclays tells its customers their arranged overdrafts are being cut

Barclays is writing to some of its current account customers informing them overdraft limits will be removed if they haven’t used it for 12 months. 

An overdraft is a form of credit on a current account which allows customers to withdraw money or pay bills from their bank account even if there is no money in there. 

According to reports, Barclays is either reducing and withdrawing authorised overdraft limits for some banking customers. These would have been previously approved by the bank. 

With many customers struggling to cope due to cost of living pressures, some have taken to Twitter to vent their frustration at the bank.

One post read: ‘I had my letter over a month ago, £1500 overdraft to cover essential bills should wages fail. 

‘Never use it, but been reduced to £200, I have a foot op next month I’ve been waiting for for 3 years, 2 months off work.. Thanks Barclays 30+y good credit rating could be gone!’

Another post read: ‘Barclays giving a single mother 2 months to pay off a £1600 overdraft, one she’s had with you for 25 years!’

Another customer responded by leaving the bank all together by switching to First Direct via the current account switching service.  

He said: ‘So Barclays decided to take my overdraft away even though I don’t use it. 

‘Thanks to First Direct and a 7 day switch, I’ve closed my account and moved to one with an overdraft. Way to keep your customers#fail.’

In response to the criticism Barclays has said that it would not be correct to imply the cost-of-living crisis was the cause of these changes.

It claims its overdraft review process is nothing new and that it has been reviewing customer overdraft limits in this way since last year, so it would not be correct to imply that the cost-of-living crisis was a catalyst.

The bank says this is about making sure that customers don’t have access to more credit than they can afford to repay. 

It added that arranged overdrafts are not interest-free – they are a form of debt, and should not be seen as the default way to access short-term credit.

A Barclays spokesperson said: ‘It’s important to manage an overdraft like any other debt, and we have a duty-of-care to try to prevent customers’ overdraft limits being more than they can afford.

‘As a result, we review all personal arranged overdraft limits at least once a year, taking into account all the financial information we have about each customer. 

‘Where this suggests that a personal arranged overdraft limit may be too high, we’ll plan to reduce it to a lower limit, taking into account how much of the overdraft has been used over the past 12 months. If the overdraft hasn’t been used at all for a long time, we may remove it.

‘We’re giving customers sufficient notice to allow them to respond to any planned change and take the most relevant and appropriate action for them. 

‘If customers feel they are able to afford their current limit, they will need to provide additional information to confirm their income and expenditure, so we can meet our requirements as a responsible lender.’

Where should unhappy customers do?

Whilst Barclays customers are currently charged 35 per cent when dipping into their arranged overdrafts, there are other providers out there which may be better suited for those expecting to do so.

First Direct currently offers £250 interest-free overdraft, whilst Nationwide is offering interest-free arranged overdraft for 12 months via is FlexDirect account.

There are a host of other benefits that current account providers can offer including cashback and higher in-credit history. 

For anyone weighing up which current account might be best for them, check out This is Money’s pick of the best current accounts for interest, perks, packages and overdrafts.  

Customers can easily switch using the current account switching service. In fact, 8.2 million people have successfully done so since the service began in 2013.

Barclays has lost almost 500,000 more customers than it has gained during that time via CASS – more than any other bank. 

Many people are put off switching because they think it will be a faff, or worse, it may cancel important direct debits relating to bills, mortgage or rent for example.

There are also concerns about whether income from salary will be redirected to the new account.

The switching service has tried to address all of these issues. CASS confirmed that it completed 99.7 per cent of switches within seven working days, whilst 89 per cent of end users were likely to recommend using the service.

In terms of the common concerns around switching, all payments going out, such as direct debits, and those coming in, such as salary, will automatically be moved from the old account to the new one.

Payments accidentally made to or requested from the old account will be also automatically redirected to the new account for as long as the facility is required.

The Current Account Switch Guarantee means that a switcher will receive a refund for any interest or charge on their old or new current accounts if anything goes wrong with the switch.

End users can switch if they are overdrawn but they will need to agree any overdraft facilities required with their new bank or building society.