Overdraft Query

BoboJ81

Hi Y'all

First post, so go easy on me

I'm aware that my bank (Barclays) are well within their rights to reduce my overdraft as they feel fit with prior notice. My girlfriend and I are saving for a deposit on a house and a lump some of £6000 has come our way. Happy days. I have been living withing my limit (£3000) for the last 10 or so years, drip feeding Barclays a large some of money over that period of time.

I decided that it would be a good idea to put half the lump sum in my current account, thus negating £30-£40 interest payment a month. Obviously, we will want to use this money at a later date for our deposit.

What do you think are the chances of Barclays sending me out a letter saying thay are going to reduce my OD considering they haven't in 10 years? Worried we will lose this money but a saving of £30-£40 a month makes sense.

Your advice/experiences please.....

Archi_Bald

Where would you get £30 - £40 a month interest for £3,000, or even £6,000? The very best you could hope for is £20 a month after BRT on the full £6,000 (Nationwide FlexDirect, 5% to max £2.5K, for 12 months). You are allowed 4 Nationwide current account but are only guaranteed 5% on one FlexDirect).

So even with the best deal in town these days, you would still be down some £10 to £20 a month if you kept your overdraft. Not a great approach if you are saving up for a mortgage.

If I were you, I would pay off the overdraft, and stay out of it for good. If you want to be a home owner, you don't want an overdraft.

Put your remaining £3,000 or so to good use - investigate FlexDirect, Lloyds or BoS Vantage, TSB Enhance or Santander 123.

Also look at Halifax Reward - between you and your partner, you could make £120 a year if each of you had one of these.

grumbler

Regardless of anything, saving and "living within your overdraft limit and paying £30-40 interest on it" doesn't make much sense: Should I Repay Debts or Save?

Using an expensive overdraft for a house deposit isn't a good idea either.

BoboJ81

Sorry, I don't think you've fully understood my query. I've used the £3000 to temporarily clear my overdraft until we are reday to buy a house. Just wondering if it is likely that Barclays will reduce my overdraft during this period. I'm doing this so I am no longer paying Barclays £30-£40 a month for being £3000 overdrawn.

grumbler

OK.

• You are deep in your £3K overdraft and paying £30-£40 every month for this. Correct?
• You are saving for a house deposit. Correct?
• You can clear your overdraft but are afraid that Barclays can reduce the limit as a result and you will not be able to use it in the future for adding extra to what you saved for the deposit. Correct?

My answer was:

• Regardless of your recent windfall and your future plans, if you really have any savings it makes no sense to pay £30-£40 every month for your overdraft just for the sake of having it in the future.
• Use your savings and the windfall to pay it off and to save extra £30-£40 every month from now on.
• Even if they reduce the limit (unlikely) it isn't a big deal as it is a bad idea to use expensive overdraft for borrowing extra £3K for your deposit. Overdraft is for short-term borrowing, not for long-term living deep into it close to the limit.