Graduate Account

clarerugby

Hiya,

I need some advice...

I graduated in 2007 and still owe £1900 on my graduate overdraft, the interest on this around £26 a month.

I have been paying £50 a month from another account in which my wages go in but this is barely touching it with the interest. Do you think it's worth changing my banking so that I get paid into my overdraft account and leave a bit extra in there at the end of every month? Will my interest amount go down? I could never understand how they're worked out.

I just want it gone!!

Thanks,

Clare

Svenena

Who do you bank with? Some banks charge £1 a day for using an authorised overdraft, in which case it won't make any difference whether you're at the bottom of the overdraft or near the top. On the other hand, if you are charged interest, getting your salary paid into the account and using it for your spending, so that you're not constantly at the bottom, but sometimes near the top, will reduce the amount of interest you pay (as it will be calculated daily), so could help you.

If you only have £50 a month spare, it will take you over three years to clear without even taking into account interest/fees. Can you cut down your spending somehow? If you pop over to the debtfree wannabee board, and post an SOA, people will be able to give you tips on where you can reduce your outgoings, and/or increase your income.

Lizling

I’m new to these forums and certainly no expert, but £26 a month interest would be £312/year (ignoring compound interest making that £26 increase). £312/£1900 = 16.4% AER. That seems extremely high for an overdraft – more like a credit card!

Perhaps a word with your bank to clarify what you’re paying for there might be in order? Possibly followed up by a change of bank. Could you have been moved out of a graduate account into something less generous, it being 3 years since graduation- and somehow you’ve ended up paying fees on it?

Svenena

I think overdraft interest rates generally are high. Barclays, for example, charge 19.3%.

Although when checking, I've noticed they're offering an interest-free overdraft for a year if you switch to them and pay in at least £1000 a month. So might be worth switching bank accounts OP, either to Barclays or another bank (have a look around to see what other banks are offering).

Lizling

Svenena wrote: »

I think overdraft interest rates generally are high. Barclays, for example, charge 19.3%.

True. I should have said graduate account overdraft, which I'd expect to have at least £1000 for free. Hadn't realised they'd got quite so expensive though!

Svenena

Yep, it is pretty shocking. But they should only be used as short-term lending really, not for living in!

I'd be surprised if the OP still has an interest-free overdraft in the 4th year after graduating. Don't graduate accounts revert to standard accounts after a certain amount of time? I recently converted my Lloyds Graduate account to a Vantage one after having it for less than two years, so I don't know whether the account type would have changed if I'd left it to run its course, but certainly the interest-free element of the overdraft was reduced each summer and would have stopped being 0% at all three years after graduating.

DrSyn

Investigate if you are able to join a local credit union and to see if they might be of any help to you. They are not well known about and banks will not tell you about them.

Some offer current accounts.Even if they cannot help you now, make a note about them for the future.

www.moneysavingexpert.com/banking/credit-unions

clarerugby

Thank you all for your help. It's a Natwest account and I'm going to speak to them on Saturday. I (quite shamefully) didn't realise £26 was a lot. I'm going to get this sorted. I'll look into a new bank account too. Would I get one with an overdraft facility (with less charges) and use this to pay off my current overdraft?

I have saved with the credit union in the past to help pay the deposit on my flat.
Some months I do pay more, in fact not so long ago I had paid almost half of it off but that was diminished to help my mum out of some bother. :-(
I will look into reducing my spending though - if I could only pass my driving test! My lessons are costing me a fortune...

DrSyn

Recommend "First Direct" or "Co-op Bank" as alternative to Natwest.