Should I Keep an Overdraft Facility?

Paige_Turner

Recently the charges on my 2x £500 overdrafts have become a lot more. I am now charged £6 pm on each if I go over £10 into my ODs. As well as that I pay about £6pm each in interest, nearly £25pm on charges for 2 ODs seems crazy.

Anyway, I have now applied and been successful in getting a Virgin Credit Card with a money transfer to cover the two overdrafts.

One is on an old account which I only use now to separate my fuel money for the month from my main account and so I will be cancelling that OD completely.

My query is, should I keep an amount of OD available in the other account - say £100-200? Is it considered good financial management to have an OD that you don't use? Or does it not really make any difference?

I think I would prefer to close it altogether tbh because I struggle to see any "available funds" within my current account as not really being mine, probably because I've lived in my OD for so long...

pogg000

Your arranged overdraft is free unless you use it, but the penalties for using an unarranged overdraft will be far more than that. So I would keep it just in case you slip into it.

HappyMJ

Paige_Turner wrote: »

Recently the charges on my 2x £500 overdrafts have become a lot more. I am now charged £6 pm on each if I go over £10 into my ODs. As well as that I pay about £6pm each in interest, nearly £25pm on charges for 2 ODs seems crazy.

Anyway, I have now applied and been successful in getting a Virgin Credit Card with a money transfer to cover the two overdrafts.

One is on an old account which I only use now to separate my fuel money for the month from my main account and so I will be cancelling that OD completely.

My query is, should I keep an amount of OD available in the other account - say £100-200? Is it considered good financial management to have an OD that you don't use? Or does it not really make any difference?

I think I would prefer to close it altogether tbh because I struggle to see any "available funds" within my current account as not really being mine, probably because I've lived in my OD for so long...

Personally, I'd cancel the overdraft so that your available balance displayed is your actual real balance and you aren't tempted to use it just because it's displayed as being available on your advice slip. It's a very expensive form of credit.

LeeSouthEast

Personally, I'd switch to somewhere with more reasonable OD fees! Barclays (just off the top of my head because I bank with them) have fee and interest free first £250, for example.

Paige_Turner

Thanks for the responses. I would consider moving my account elsewhere but the rest of my current account package suits me very well, eg mobile & travel insurance, free access to Experian, free music downloads, free Lovefilm subscription... Don't think I could beat that anywhere else.

I think I might reduce my OD to £100 and see if I can teach myself that that bit is not my money. If I find myself slipping back I will pay it off altogether and cancel it.

LeeSouthEast

Paige: Read the terms and conditions carefully. Can you get away with having 2 current accounts? One you have your wages paid in to (for the above mentioned benefits), and then blast it over by Standing Order to 'another' account that you use for real banking with reasonable OD fees?

Just a thought