Best way to clear my overdraft?

Jonesy127

I currently have an Alliance & Leicester Current Account, overdrawn by about £1150; I have an agreed overdraft limit of £1200.

I estimate I can afford to pay off about £40 a month of the overdraft.

I would like to switch from A&L and join FirstDirect, which I have heard good things about. How should I manage this?

Should I see if FirstDirect will match my current overdraft facility and do a total switch? Or perhaps open a FirstDirect account, go £250 overdrawn (which is free), but keep the A&L account open and have a standing order of £40 a month from FirstDirect to A&L to slowly pay off the remaining £900 overdraft?

blueberrypie

First Direct are quite fussy about credit records when opening accounts - don't assume they will accept you as a customer when you've been overdrawn for a while.

Also note that overdrafts are repayable on demand - it's quite likely that A&L will ask you to pay off your overdraft immediately if they see you are no longer making regular deposits into the account (apart from the £40/month).

premierfella

I suspect that the % utilisation you have on your existing overdraft could potentially count against you when being credit scored by another bank (just something to be aware of before making the application for a new current account).

Not necessarily advice, but in your position with that sort of overdraft I would probably consider doing a super balance transfer to a 0% credit card to deal with the existing overdraft (assuming you can honestly say that you have the self-discipline not to run up a new overdraft whilst carrying the existing overdraft on the credit card and paying it down as indicated). I would then do the current account transfer.

Jonesy127

Thank you; that’s not an option I’d considered.

Would such a transfer of money (from the credit card to the current account to pay off the overdraft), incur a charge of fee?

Or would it be regarded as a ‘balance transfer’ or ‘purchase’, thus covered by the 0% if that is the sort of card I get?

Jonesy127

Can anyone help? I'm not sure such a transaction (payment from a credit card to a current account) takes place...

tellmeitsfriday

There's a small number of cards which allow "super balance transfer" i.e. to a bank account rather than a card account. There will be a fee... maybe around the same as a normal balance transfer - the last one I did was 2.9 % but I don't know if that is normal.

You must have a reasonably good credit rating to get accepted for one of these cards. I think MBNA are doing one at the mo, but check on the interwebulous

serious_saver

The best thing would be to contact First Direct and ask what their policy is. There's no obligation to take out an account and they would be able to tell you if they would be likely to consider you a high risk customer. Provided you have never exceeded your agreed overdraft limit you might find they are more amenable than you think.

CLAPTON

you are permanently in your overdraft
you owe 1150 but can only afford to pay off 40 per month... thats two/three years to clear the OD.
changing banks is high risk as A&L may recall the OD.

you really need to look at your spending and income and look for ways of reducing the OD at a much faster rate...