Any advantage to lowering overdraft limit?

ticktockhouse

Hi

A potted history of my bank accounts first:

Have had a Smile account for donkey's years, started using the OD a coupla years ago when our first nipper was on the way (expensive things, they are!). It had a not bad rate of 9.9% APR. This was before I was well versed in Moneysaving, BTW...

Opened an A+L Premier Plus in Feb of last year to take advantage of the 0% OD, and have had my salary paid in there to meet the £1000 a month requirement. I have a Standing Order set up to go into the Smile account on the same day, as the Smile was still my main account. I used the (somewhat paltry, I thought) £650 A+L OD to quickly pay off another debt, and have been studiously saving up to have it paid back by this Feb.

We do all possible purchases on our Smile CC (was 9.9%, now 10.9% APR) to get a paltry 0.5% cashback, and I try (though don't always succeed) to pay it off in full each month to avoid interest. I also have a £1000 at 0% BT on another card till September, which I don't really expect to pay off by then, but I'm fully prepared to look for another 0% offer, or go for a life-of-balance BT at that time if it's at all possible...

So far so good.

My plan in Feb, is to start using the A+L account as my main account, by this I mean the account that my rent, any cash spending, credit card repayments goes out of, and benefits etc. go into (salary goes in there already, remember?). I'm going to keep all my bills, DD's etc. coming out of the Smile a/c a) to avoid hassle and b) to hopefully budget a bit better :idea:. I'm also (and this is mainly why I've posted this) going to move my OD from the Smile account (was 9.9% APR, is going up to 10.9%), to the A+L account to take advantage of the lower interest rate (5.9% I believe?).

Phew! So now I've cleared all that up: Is there any advantage to lowering my OD limit on the Smile account in terms of credit scoring etc? And while I'm at it, am I on the right track with all this financial jiggery-pokery? One of the biggest things that causes me grief is that my OH (bless her), seems to consistently overspend on the CC, making it quite hard to pay back in full. For a while, discussing finances became a bit of a sore point (mainly due to me getting depressed at the beginning of every month after seeing our bank statement, then consistently failing to do anything about it). But it's getting a lot better now. Still, I do come home to find out she's spent a significant amount :wall: (to be fair, a lot of the time it's on fairly essential things, like clothes for the bairn, etc.).

I'm the only earner, and while I am on fairly good money, it's not really enough to stop us creeping further and further into debt each month, as evidenced by my overdraft...

Sorry, I seem to have gone on a bit, hope you haven't been led astray by the subject line. It's not as bad as I've made things sound at the end there. This may have been better placed on another board...

Thanks in advance for any replies

Jerry

: )

YorkshireBoy

Reducing your overall 'available' credit can help improve your chances of obtaining credit elsewhere, eg 0% credit cards. However, it is only one part of the credit scoring* assessment made by other lenders. They will also look at other criteria such as...

Stability Indicators
Time with employer
Time with bank
Time at current address
Homeowner
On electoral roll

Income
Your salary
Total household salary

Expenditure
Mortgage debt
Loans
Other credit cards (both debt & available credit)
Overdraft
Storecards
Buy-now-pay-later schemes
An assessment of your living 'needs' (council tax, no of dependants, etc)

Credit History
Payments on time
No defaults
No CCJ's

So, as you can see, your overdraft is one small part of a much larger assessment of your 'credit-worthiness'. Only you can decide, based on your own circumstances, if it's worth lowering.

You will need to balance the 'negative' effect of your overdraft with the benefits it provides in other areas of your day-to-day finances. If you're good with money, then they can be very useful indeed. However, if you are not so good, then it doesn't matter how large the overdraft, you will always overshoot it.

Finally, how about accompanying your wife on her shopping expeditions?

* You can read up on 'credit scoring' by checking out https://www.stoozing.com/credscore.htm