Overdraft a lifeline for many

Around 78 per cent of people have an arranged overdraft facility with their bank, although 21 per cent said they would only use it in an emergency, according to discount website Groupola.com.

But 18 per cent of those questioned admitted they were constantly overdrawn and 24 per cent said they could not manage without the facility.

Only 6 per cent said they had never used their overdraft, with 2 per cent saying they had actively cancelled it. Just under half of people with an overdraft said they had requested it from their bank manager, but 32 per cent said they had felt forced into having one, while 12 per cent said they had automatically been given one when they opened their account.

A fifth of people said they had first arranged an overdraft when they were a student, while 16 per cent had taken one out to help cover an expensive purchase.

But despite 66 per cent of people saying they considered an overdraft to be a form of debt to worry about, 38 per cent admitted they had no idea how much interest they were charged on it.

Mark Pearson, chairman of Groupola.com, said: "An overdraft can sound extremely appealing, but it will always be something that needs to be paid back at some point."