Halifax overdraft

Nicky321

My friend has 2 overdrafts totalling £3450 with the halifax on accounts he no longer uses, and is paying a total of £62.00 per month because overdrawn for 31 days per month and charged £1 per day per account. He banks with a different bank but they did not match his O/D and he cannot clear the O/Ds (therefore paying charges each month, £744 per year. However he has a virgin credit card and credit available on 0% for 12 months. Would he be better off transfering money from his credit card to his current accounts to clear the O/D?

PNPSUKNET

why not see if they have any super balance transfer deal offers?

Nicky321

PNPSUKNET wrote: »

super balance transfer deal offers?

How would he find out about them? He has promotional offers showing on his statement of 0% for 12 months on balance transfers

ironlady2022

Better to ring up and ask. The fee would be 3-4% but overdrafts can vary and are around the 15% region so yes he would save money!

opinions4u

If the Halifax account isn't being funded, there's a risk of them pulling the plug on the overdrafts and calling them in.

I'd expect any 0% balance transfer deal to cost you 4% - up towards £150 - so make sure the deal is for long enough to be worthwhile.

A couple of other observations:

1) How did the overdrafts get to this point? Spending exceeding earnings - is this spending pattern still occurring? Has the underlying habit that created the debts been changed? If not, this may not help you in the longer term.

2) At some point a credit card company will move you on to normal rate. And then hike the rate up to a silly number. On a £3000 debt a rate of 2.5% a month will cost £75. So if no steps are being taken to actually reduce the debt there is a high likelihood that, once any 0% deal has expired, this move makes you both worse off.

If you end up keeping the overdrafts for now, assuming they are both less than £2,500 then pay off the one with the smallest balance first to get the charge down to £0 a month on one of the accounts. Make sure you pay £1,000 a month through both accounts - if they are Reward accounts this will pick up a fiver each along the way (if not, redesignate one to a Reward) - to reduce the likelihood of Halifax pulling the overdraft.

In other words, don't just focus on the cost of credit. Focus on paying it off. A visit to Debt Free Wannabe would be a good idea.

Nicky321

opinions4u wrote: »

If the Halifax account isn't being funded, there's a risk of them pulling the plug on the overdrafts and calling them in.

I'd expect any 0% balance transfer deal to cost you 4% - up towards £150 - so make sure the deal is for long enough to be worthwhile.

A couple of other observations:

1) How did the overdrafts get to this point? Spending exceeding earnings - is this spending pattern still occurring? Has the underlying habit that created the debts been changed? If not, this may not help you in the longer term.

2) At some point a credit card company will move you on to normal rate. And then hike the rate up to a silly number. On a £3000 debt a rate of 2.5% a month will cost £75. So if no steps are being taken to actually reduce the debt there is a high likelihood that, once any 0% deal has expired, this move makes you both worse off.

If you end up keeping the overdrafts for now, assuming they are both less than £2,500 then pay off the one with the smallest balance first to get the charge down to £0 a month on one of the accounts. Make sure you pay £1,000 a month through both accounts - if they are Reward accounts this will pick up a fiver each along the way (if not, redesignate one to a Reward) - to reduce the likelihood of Halifax pulling the overdraft.

In other words, don't just focus on the cost of credit. Focus on paying it off. A visit to Debt Free Wannabe would be a good idea.

He has been on this site, sorted the budget planner, and is in the green, he has been on the snowballing spreadsheet and put in his debts. Looking at the results his debts and the O/D with halifax will be paid off within 4 years, he could be paying £31/month x 2 accounts for 4 years and the O/D not be cleared. ATM its looking like 4% charge to switch the O/D to a Credit Card at 0% for 12 months.