Halifax Overdraft rate

geordie_ben

Hopefully a quick one....

Am I right in thinking that Halifax's £1 a day overdraft fee on a £2000 overdraft is the same as it being 18% APR?

jack_sprat_2

I was wondering the same thing.

I think £2000 and £365 interest is 16.25%

And £2500 at £365 interest is 14.6%

So if I've got a credit card with £2500 on and am paying more than 14.6% on it, could I switch it to the Halifax overdraft and in theory be reducing the interest I'm paying?

Any ideas?

jack_sprat_2

Actually I got my maths wrong.

£2000 at £365 is 18.25%.

Good start with my first post!

rb10

Assuming that your balance did not change at all during the year, then you would be paying the same amount on the Halifax account as if you had an account charging you 18% EAR.

However, don't forget the £5 Reward - this means it's actually equivalent to an account charging just 15% EAR.

onlypaddy

you cant interpret the new charging system into an APR figure as not everyone will have the same balance.

E.G. as in an above post....£365 charge on £2500 overdraft is 14.6% APR

BUT the charge is the same regardless of the amount of overdraft.....E.G. charge is still £365 for a years overdraft of £100.....and that is 365% APR!

jack_sprat_2

I agree with you on that, it wouldn't be worth doing unless you kept your balance up at £2400-2500 all the time.
Any less and your charges start to increase.

Going back to my original question though,
EG
I've got a credit card debt of £2500 that I know I can't pay off in the next 9-12 months due to other debt commitments.
Interest is about 19% at the moment, I can't get a balance transfer and have no other way of clearing this down.

In this circumstance, would shifting it to the Halifax be beneficial? As long as I pay the interest value each month (31, 28, 31, 30 etc) to keep it just under the £2500.
In my head I think it would be but just looking for some feedback.

onlypaddy

wel in theory, yes....but its a lot less secure - remember overdrafts are repayable on demand, so you could end up having it recalled and paying £5 a day instead (155, 140, 155, 150 etc)

YorkshireBoy

jack_sprat wrote: »

Going back to my original question though,

I wouldn't shift it for several reasons:

1. The 'repayable on demand' issue already raised. If your credit rating is that bad you won't have a get out plan (ie loan, O/D switch elsewhere, SBT card).

2. You'll still owe the £2,500 this time next year, ie you're only paying the interest and nothing off the capital, ie 2-3% minimum payments on the card means up to half your monthly payment reduces the capital.

3. Overdrafts are designed for short term borrowing. Any lender searching your file will see that you're struggling (or appear to be struggling) with day-to-day issues month on month.


I'd be keeping the debt on the card and taking other measures, ie cutting back elsewhere and trying to earn more.

Cash_Flow

YorkshireBoy wrote: »

I wouldn't shift it for several reasons:

1. The 'repayable on demand' issue already raised. If your credit rating is that bad you won't have a get out plan (ie loan, O/D switch elsewhere, SBT card).

2. You'll still owe the £2,500 this time next year, ie you're only paying the interest and nothing off the capital, ie 2-3% minimum payments on the card means up to half your monthly payment reduces the capital.

3. Overdrafts are designed for short term borrowing. Any lender searching your file will see that you're struggling (or appear to be struggling) with day-to-day issues month on month.


I'd be keeping the debt on the card and taking other measures, ie cutting back elsewhere and trying to earn more.

Halifax report O/D limits not balances:D

onlypaddy

Cash_Flow wrote: »

Halifax report O/D limits not balances:D

how is that a good thing.....the limit could be £2500 and the credit report shows this, even if there is nowhere near that amount actually owing?

Cash_Flow

onlypaddy wrote: »

how is that a good thing.....the limit could be £2500 and the credit report shows this, even if there is nowhere near that amount actually owing?

How is it a bad thing Paddy?