How to pay off overdraft?

eryn_kathleen

My husband and I both have £2000 overdrafts from our student days. He'll be paying interest on his soonish, while I have another year before I pay interest on mine. We have two separate accounts at Natwest and no joint account.

Here are the options I'm thinking of:

1. Ask Natwest to reduce the overdraft(s) by £100 per month.

2. Open a new account elsewhere as our primary account and pay £100 into our Natwest accounts.

3. Open a new account and transfer spending money into it (that is, leave money for Direct Debits plus £100 a month in the old accounts, transfer everything else out)

I don't really have a clear preference between these three, although I'm leaning towards the latter two. I really want to know what works for everyone else here, what's the easiest method and what keeps you on the straight and narrow!

crawley_girl

What about opening an account with another bank? Some banks will offer to match your exisiting overdraft at 0% for a year... A&L springs to mind - remember to go thru quidco and get the £50.

eryn_kathleen

Thanks for that... I was thinking about opening the new account at a different bank, but it didn't occur to me to just transfer the accounts to a new bank. I'll definitely check it out!

I'm still interested in paying these off (or at least reducing them). Any more tips?

SunderlandBlackCat

I used to really struggle to get my overdraft down when I was trying to do everything from 1 account.

I opened a new current account & got my wages paid into that & started treating the old account as if it was a loan that needed regular repayments. Now I'm overdraft free.

ancasta_2

What i have done.. is open an account with lloyds, and transferred everything to go in/out of this account and set up a standing order to barclays to pay £150 a month off my overdraft. Cut up the cards as im way to lazy to go and stand for an hour in my lunch break in the queue to withdraw money so it will stop me dipping in.. BUT i know in an emergency it is available.

I havent notified Barclays that im doing this as i feared, after reclaiming my bank charges, they might be awkward and shut my account and demand payment in full, which is do-able, but i'd rather split it down and make it more manageble.

HTH?

K x

Imelda

I would set up a new account and treat the overdraft like a loan, it's too easy to think I will reduce the overdraft by £100 this month and then when it gets to a few days before payday taking an extra £10 out because it doesn't matter that much. I got a bonus from work so was able to pay mine off in one hit last April, I have not gone overdrawn since.

CLAPTON

my view is that unless you properly address the spending issues of why you are spending too much, no amount of opening new a/cs will really help.
in fact you may very well end up with another large overdraft in addition to the ones you have already. fiddling with rome burns comes to mind.

so i would recommend that you start a proper budgetting exercise (maybe use the budget planner at the top of this page).

also start spending diarys so you can both see exactly where all your money goes and be particularly careful that you include all the annual and oneoff costs (maybe like those holiday/weekends away etc)

if you then wished to post it here i'm sure the good people here will help you reduce your spending.

moozie_2

I agree with everything that Clapton said :T In addition to that, be careful if you move your income and bills elsewhere and treat the OD as a debt because some T&Cs include paying a regular amount into the account which may be as high as a salary. Worth checking out as if you don't follow their T&Cs, you mayb be asked to pay the balance in full.

I took my OD to A&L and their T&Cs for my account include paying £500 into it every month. They have various account though so check them out as the 0% helps a lot!

eryn_kathleen

Thanks, those are all really helpful suggestions!

I'm working on a budget for us now. It's taking a little while because I still need to confirm all of OH's outgoings - his job for today. My income is hard to predict in the medium and long-term because I work part-time (variable hours) and am finishing a PhD, but I'm calculating based on a minimum income to regulate our spending. I'll post an SOA here once I finish it!

I'm sure everyone says this, but we're not really big overspenders - we both had 7 years of university, which was pretty resource-draining. Now we're at a place that we can start paying off that debt.

Having said that, there's definitely room for tightening in our budget! Our biggest problems are food (already switched to Costco and Lidl) and day-to-day frittering. I've got a 'debt pig' which I'm hoping will grow up to be a 'house deposit pig' and then a 'mortgage pig'.

This site, and this thread, have been hugely helpful. When I first came on here I definitely didn't think we earned enough to pay back debts. When I see what other people have done, it makes me realise that I should have done this a long time ago!

hbl_2

CLAPTON wrote:

fiddling with rome burns comes to mind.

Nero couldn't play the fiddle cos it hadn't been invented during the fire of Rome. He might have sung though?

I was in a very similar situation with my overdraft. It was also £2000 interest free, and this went down to £1500 interest free and now £1000 interest free while it stil retains a £2000 limit. I've got my account to below the £1000 threshold and I did so by reducing it by £100 a month. I would simply say to myself, "right, my limit is now £1700" so my overdraft simply absorbed £100 of my salary each month.

In actuality by the time I got to £1500, I had over £500 saved so I simply moved all this to my overdraft, bringing me under the £1000 interest free portion and continued to save the £100 each month in a high interest account.

If you continue to save against it, when they reduce the limit again, say to £500 interest free, you have a lump sum ready to pay it off thus incurring no interest, but having accrued some in the meantime.

You don't really need to open a new account, it can be easily managed from your existing one. It's good that you're addressing this now to make sure the money's in place for when they start charging interest.

I've kept my limit at £2000 for two reasons. a) I don't want to ask them to reduce it to say, £1000 for them to accidentally reduce it to 0 (I've had this happen to a friend) and b) it's reassurring to have a little felxibility without imposing actual hard limits on things. I'll cancel my overdraft when it's zero for real.

Good luck.

tsharp

crawley_girl wrote:

What about opening an account with another bank? Some banks will offer to match your exisiting overdraft at 0% for a year... A&L springs to mind - remember to go thru quidco and get the £50.

How long does it take to credit? And does it sit there as £50 you can take out from quidco, like a betting account, or points like in pigsback?