New account no overdraft - can i do this?

John108

Hi this is my first post but i've been watching these boards for some time now! I hope someone can help!

Here's a bit of background...I currently have an account with Lloyds with a £900 overdraft and a current account with HSBC that currently has a Nil balance and no overdraft facility.

Due to a few money problems recently every month i'm living in my overdraft and sometimes going over the limit and getting charged. I get paid £1100pcm and after charges and going over my overdraft limit I usually only have £700pcm to pay my credit card bills, mortgage and the usual household expenditure!!

Someone has suggested that i should have my wages paid into my HSBC account and transfer all of my Direct Debits etc to that account. This will give me my wages of £1100 to cover my expenditure and leave me with around £400 'available' cash to pay off debt etc. The idea is that i will leave my Lloyds account with my £900 overdraft but transfer some of the £400 available in my HSBC account to clear my overdraft which will take a few months!

Can someone tell me is this legal? It sounds too good to be true and i'm a little confused! :huh:

Thanks in advance!

PS - Im already working on reducing my outgoings by contacting my utility suppliers etc.

mac2008

Of course its legal - i.e. you're not breaking the law, but if you reckon you have £400 per month available for debt repayments, why isn't your Lloyds overdraft decreasing? The monthly charges can't be that much. I suggest a drawing up a detailed budget to see where your money is actually going.

Lloyds may also notice that the account has stopped being funded and demand repayment of the overdraft (which you won't be able to do immediately). This may have an impact on your credit score.

Good luck

John108

Cheers for the response!
The reason the overdraft isn't decreasing is this...A few months back i had a bad month i was already in my overdraft and spent more money than I had (car needed a new exhaust, MOT and tax all at the same time) so I ended up going over my overdraft limit of £900 by maybe £200 so when my wages of £1100 went in, that paid off the £200 I was over my limit then paid off my overdraft of £900 leaving me with £0 account balance but £900 available balance. This is now a vicious circle each month just to meet my necessary payments i'm going over my overdraft limit! If I transfer everything to the new account i should have £1100 available balance which will cover my necessary payments and leave me with £400 to spend how I like (pay off debts is obviously my first move)!
Also, I recently downgraded my Lloyds account so I dont have to pay a set amount into the account each month. This should get round them demanding payment of the overdraft in one go!

Lokolo

Only thing to warn you about is that Lloyds can remove the overdraft without notice or warning. So you could end up paying a lot of charges if they do remove it.

If you are not already, do a budget planner type SOA:
http://www.makesenseofcards.com/soacalc.html

Then you know where you are spending your money and you might be able to cut down.

However, if you really think you have £400 spare, then I doubt you can cut much more down.

John108

Lokolo, already done an SOA. This is where I worked out I had enough extra cash to make big dents in my debt if I can shuffle accounts.
I reckon that with a bit of effort I will have no credit cards (currently got 2 with a total balance £750...im looking to transfer these to a 0% card) and no overdraft (or just a small one for emergencies) in about a year!!

talana

Of course by all means move accounts if you want to, but that's not really the issue here.
Budgeting is.

If you've done an SOA and worked out you will have £400pm to put towards the debts if you stick to a strict budget, that's great!
But that will be the case whether you stick with Lloyds or move to HSBC. Moving banks alone will solve nothing.

paulmcerlean

Regardless of you downgrading your account, whilst it has an overdraft, Lloyds can still call it all in as and when they want - and I would be very confident that they will do that if the account stops recieving a salary each month.

You are taking a big risk as they will destroy your credit file.