The Consumer Credit Counselling Service (CCCS), a charity which gives advice to people who are struggling with debt and repayments, has warned that many consumers are turning to the more expensive option of overdrafts rather than tackling any gap in their finances with loans or credit cards.

Una Farrell, a spokeswoman for the charity, said that “these people may have been turned down for a credit card or loan, but they will already have the overdraft with their bank account and just not used it in the past.”

With the financial situation continuing to worsen for a lot of people, households are finding that they are unable to make their income and expenses add up, leaving a gap between what they are earning and what they are spending. Many families have turned to loans or credit cards in these difficult economic times, hoping that they will be able to pay off the extra debt they take on once the global financial situation improves.

However, for those who are denied these options by lenders, there are not very many options remaining. Of those that do, the overdraft facility on their bank might seem like the easiest. Unfortunately, overdrafts on bank accounts are normally far more expensive than the repayments on a loan or credit card would be. Whilst the latter have carefully governed rates of interest and are designed for the manageable allocation of debt, banks view overdrafts as an emergency option, and so the price people pay is much higher. Consumers can find themselves not just paying high interest rates, but also having to fork out for monthly admin fees.

In response to this, the CCCS has urged people to view overdrafts in the same way they would any other sort of debt, taking into account what the rates they will be paying are and whether they would be better off getting a loan or credit card instead. If they have been denied these services before, then there are other alternatives and the CCCS is happy to give advice on these.