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If you have an overdraft, you may see it as a great safety net for those times when you don’t quite have enough funds in your account to cover an important bill. However, it’s important not to forget that your overdraft is a debt, and it can come with penalties and charges if you’re not careful.

With this in mind, if you know that you spend most – or even all – of the month in your overdraft, this might not be the best position to be in. And yet it is not a particularly unusual one.

How long does it take you to go overdrawn?

According to a survey* carried out on our behalf, a quarter of people in the UK say that they are usually overdrawn by about halfway through the month – or 17 days after payday. This means spending half of the month in debt if they have no additional income.

Living in your overdraft like this makes it more than just a safety net. In fact, more than one in five respondents admit they are overdrawn just one week after getting paid or receiving their benefits.

Young people are the most likely to be regularly overdrawn each month. Half of 18 to 24-year-olds admit they go overdrawn at some point between paydays.

Beware the charges

If you find you spend most of the month in your overdraft, there’s a danger you will edge ever closer to the limit – especially if you have a lot of financial commitments you have to cover. This can open you up to having to pay a charge for going into an unauthorised overdraft if you go over your limit.

Even if you don’t go over the limit of the overdraft you have available, you may be charged interest. Some overdrafts charge a different rate of interest depending on how much of it has been used – which can make them very expensive.

A different way

It can be risky to spend so much of the month inside your overdraft. An unexpected bill might mean that you’re pushed close to or even over your limit, which could lead to a charge. Carefully check your income and outgoings and see if there is a way for you to cut back somewhere so that you aren’t as reliant on your overdraft.

thinkmoney’s budgeting account ensures that there is money put aside each month to cover all of your essential bills and direct debits so that you don’t have to worry about missing them. There’s no overdraft, but because everything is budgeted, you shouldn’t need that safety net. There is a fee for the account – but it could work out a lot less than you’re paying in overdraft charges!

Find out more about the thinkmoney account here.

*OnePoll questioned a nationally representative sample of 2,000 adults aged 18 and over between 6th June and 16th June 2014, of whom 500 were Scottish residents.

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