Watch bank balance if you spend up this Christmas

Watch bank balance if you spend up this Christmas – Banking Ombudsman

Pre-Christmas spending puts pressure on finances and people need to monitor their bank balances to avoid overdraft fees and costs, says Banking Ombudsman Nicola Sladden.

“It’s important to watch your bank balance and know what funds are available at any given time, especially around Christmas. The seasonal demands on top of normal household expenses can strain the purse strings and in some cases, result in people going into overdraft,” Ms Sladden said.

Accounts can go into overdraft because:
• there’s not enough money in the account
• banks honour payments, including automatic payments and direct debits, at their discretion
• customers don’t have instant access to uncleared deposits that they assume they have.

Some bank customers arrange to have an overdraft facility available if they need it, but customers also can go into overdraft without such an agreement in place. This usually depends on the customer’s account conduct – those with a good credit history are more likely to be permitted to exceed their account limit than somebody with a poor credit history.

“Honouring transactions where a customer has run out of money at the supermarket, for example, may save them from being embarrassed or put out, but they may subsequently incur a fee and interest. We get complaints from people who’ve been declined at the counter and those whose bank let the transaction proceed into overdraft.

“For most people who go into or exceed their overdraft, it’s simply annoying to have to pay the overdraft fees. But for a minority of people it leads to more serious financial problems,” Ms Sladden said.

Tips to stay on the correct side of your balance sheet:
• make sure you know what your available balance is before you spend
• use mobile banking to keep track when you are out and about with your wallet
• see if your bank can load a “no overdraft” alert on your account – but make sure you understand how it works as alerts can differ from bank to bank
• see if your bank has a text alert service when you balance is getting low.

For more information about how overdrafts work and how we approach complaints about them check out our Quick Guide to Overdrafts. For budgeting advice go to www.sorted.org.nz/calculators/event-money-planner or www.familybudgeting.org.nz.

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