Noob alert :) Wondering whether to use a 0% CC to pay off my overdraft?

aliportico

My OD limit is £1250 and I'm always right up to it. I'm really sick of it, and have decided to pay it off. (My partner does most of the financial stuff, so I leave the rest to him, but we have separate current accounts.) I've drawn up a budget, am hopefully just about to start a couple of tutoring jobs (I don't work atm), and I'm also in the process of reclaiming my bank charges - one bank £732, don't know the other one yet - so this should be doable over the coming months.

I'm a bit concerned about being able to keep track of what the level of my OD should be, as I have lots of things going in and out throughout the month, and earlier I read on the Debt Free Roll of Honour that someone had paid off their OD with a new 0% CC (0% for balance transfers and credit card cheques I assume), and gone from there. This seems very appealing to me - a new start for my current account, and a separate debt to concentrate on - I could just set up a standing order to pay it off monthly. It would also allay my partner's fears about what might happen if my bank decide to close my acount for reclaiming charges!

But am I being naive, thinking it seems like a good plan? What are the pitfalls and disavantages that I haven't seen?

TIA,
Alison

GettingThingsDone

Hi Alison and welcome!

advantages - cheaper and quicker debt-free-date (see whatsthecost calculator)
disadvantages - you must resist running up your overdraft again; don't put any new spending on the card if it is at a higher rate

its early in the morning, so there may be others

alternatively, alliance & leicester do a 0% o/d and cashback through quidco, so that might work too.

personally, i opened a new a+l account with no o/d facility to tempt me. i then reclaimed my bank charges and paid off my o/d - no accounts were closed in the end. it has really helped me focus on clearing my cc debt by not being overdrawn - having a positive balance has spurred me on.

ultimately, 'do the math' and stick with it

SunderlandBlackCat

If you're going to reclaim bank charges from your current bank it's advisable to have another current account set up to change to if they decide co close your present one.

Be careful over the use of credit card cheques, each card has its own rules on their use & there are cards out there where use of the cheques is classed as a cash withdrawal & not as a balance transfer so you immediately get stuck with a high interest rate.

Cards which will balance transfer direct to a bank account overdraft without the use of cheques are those issued by Egg & MBNA (includes Virgin cards & Alliance & Leicester as well as several others)

Good luck

aliportico

Thanks a lot - will go and read some credit card T&Cs and have a think - exciting way to spend a Monday morning!

david_hellier

Well done in compling a budget. Overdrafts are difficult to manage in terms of getting them down, so it's tempting to look to another loan to pay it off. I would advise against this. Instead, you need to keep a closer look at your spending and include an amount towards the overdraft in your budget.

I suggest you post your SOA so we can all help more and suggest ways of managing the OD without shuffling the problem. See Southern Scouser's Sticky.

shoeaddict

Hi aliportico. I am in exactly the same situation as you - live in my overdraft, finding it difficult to pay it off cos money goes in and out all the time. And living in a negative balance is really depressing!

I got some advice from these wonderful people, and have decided to transfer my o/d onto my Virgin credit card. I got the card recently to transfer my other c/c balances onto, to give myself a year at 0% interest to pay it off, and for me it's definitely going to help to have all the debt in one place so I can see it going down.

Before I made this decision, I worked out a strict monthly budget which allows me to pay at least £200 onto my debt, so I know that I won't go into my overdraft again - am also going to reduce the o/d to a minimal 'emergency' amount. The new c/c is locked away, and won't be used.

I was able to transfer my o/d onto my Virgin c/c as a straight balance transfer online, meaning that the 0% interest rate still applies.

I'm sure this is going to work for me and I'll definitely keep in touch so we can give each other moral support! Best of luck.

Lucy1982_2

Like you I spend most of the month in my OD and I am trying the A&L account approach to pay it off. I am still waiting for some confirmation on what OD I am getting and then will transfer my OD into it interest free.

But good luck

immoral_angeluk

PErsonally I would pay it off and then ask the bank to remove it.

shoeaddict

Oh absolutely, the ultimate aim is to pay it off and then never use it again! I guess it's just the question of where to put it while it's being paid off.

I just can't wait for the day when I have no o/d and no c/c and can shut them both down.

aliportico

I've got 4 children, so a fair amount of money goes on them!

My SOA is as follows:

Incomings
1410

Outgoings
Sports activities for me + kids 100
Other child-related stuff 130
Charities 40
Gas 49
Electricity 78
Water 32
BT 15
Council Tax 120
TV Licence 12
life insurance 7
appliance protection 5
interest on OD 4.00
food 300 (this is what I aim for)
petrol 55
shoes 35 (I try and rotate it so one child gets a new pair a month!)
clothes 15
contact lenses 25

Leaves 388.

Which whenever I write things down like that, seems like plenty, but always disappears in no time. Since the 1st of June I've been penny-pinching, as I was almost back to my OD already (pay day was 30th May), and I won't get any more until Child Benefit on the 18th.

Still, I've sold a few books and DVDs on Amazon this last week, so I'm feeling a bit better, but I really have to get to grips with it all now. I'm ok if I'm ultra-organised.

Although the OD is annoying, it's quite a good safety net - if I paid it off with a 0% for 12 months card, I'd HAVE to pay the card off - the thought of that is a bit scary, but maybe what I need.

Spendaholic_Chick

I've just done this, paid £2k into my account from my 0% credit card for 12 months. Trouble is, having my account back in the black makes me feel I have money I've been on a bit of a spend! If you can avoid that it's a great idea!