I live in my overdraft every month – and now the banks are exploiting my misfortune

The most disturbing part of this week’s news that HSBC will be hiking up their arranged overdraft fee rate (from between 9 per cent and 19 per cent up to 40 per cent), was not the fact that this could potentially quadruple the amount of interest being paid by some of their 8 million current account customers, but that more banks are expected to do the same in the coming weeks.

In fact, HSBC is not the first high street bank to do this. Nationwide announced in July that it would be charging a 39.9 per cent rate across all current account overdrafts (excluding student accounts) in order to comply with a Financial Conduct Authority (FCA) ruling that banks would have to cease charging daily unarranged overdraft fees by April 2020, and instead replace them with an annual interest rate. Banks made £2.4bn from overdrafts in 2017, 30 per cent of which was from unarranged overdrafts.

The ban was intended to limit the harm banks can inflict upon their poorest customers. Instead, it has given banks agency to make up their profits in other areas. HSBC’s justification for the raise is that it will have no affect (or even lead to savings) for 70 per cent of the bank’s overdraft customers. But what about the remaining 30 per cent – the third who live like me?

As someone who has been living in an overdraft since around the age of 19, I know the harsh reality of what even a slight raise in fees could mean for the cash flow of HSBC customers.

I initially found myself deep into my overdraft after using the facility to fund a sudden move from the north to London for my career. For the many of us who move across the UK for work, it’s a decision loaded with expense. I’m from a working-class town in the north. I was not in a position to burden my family or friends with the costs of a deposit on my new place, food and utility bills before my first pay packet, and even basics like furniture for my room. Meeting these essential expenses meant getting into a lot of debt – debt I won’t be able to pay back any time soon.

Living paycheck to paycheck means if a single thing happens that you haven’t budgeted for, you have to make up the difference with yet more debt. With rent prices hiking throughout the UK, and in London accounting for an average of half of workers’ take home pay, young people in particular are being pushed to their limits financially. Living within an overdraft, for an extended period, has become the reality for many young women like me.

According to a report by the FCA in 2017, 29 per cent of 25-34 year olds are living in their overdrafts. A report by the Womens Budget Group (WBG) found that 55 per cent of over-indebted people are female, young and live in privately rented accommodation. Since 2014 there has been an “insolvency gender pay gap” with women being a third more likely than men to enter into insolvency. If we start placing this against existing average gender pay gap for women in the UK (20 per cent), we begin to see a clear correlation between young women not being paid enough, and a rental market that is pushing them to their limit – exactly the kind of people the 30 per cent of HSBC customers who will be hit the hardest by this rise.

As someone in a similar position, I find the language used by HSBC in defending its position to be shocking. To me, it seems the bank is trying recover profit lost from other areas by exploiting vulnerable customers. In its statement, HSBC claimed the changes were “positive”, more transparent and simplified – introducing a structure that is “easier to understand and giving customers tools to help them make better financial decisions’’. Last time I checked, quadrupling the amount of money I have to pay to remain in debt is not going to make things more “simple” for me, and it’s certainly not going to put me in a position to make better financial decisions.

This notion of “simplification” is used a lot, as if having varied levels of charges designed to ensure that people can make informed decisions is far too stressful for us to deal with, so much so that we’d just rather have less money. This isn’t just in the world of high-street banking; during the move from a multiple payment benefit system to universal credit, the Conservatives used the idea of “simplification”, claiming those requiring benefits were so stressed by having to fill out a few more forms that they would happily forgo having any income for up to five weeks to make up for the easier system. In my opinion, it is a language designed to justify cruel and unethical increases that will improve the bottom line for banks, and push the poorest of their customers further into poverty.

In its June report, the FCA had said the overdraft market was dysfunctional and a huge shake-up was required to prevent further financial harm to customers in the UK. They are right, now more than ever. We are allowing societal inequality to be exacerbated by increased fees from banks. There must be protection for HSBC’s 30 per cent.