Overdraft facilitys for the self employed

sellma

Hi.
Looking for some advice on how to proceed in the future managing my bank account.

I have just been advised by Barclays of their policy change to their overdraft facilities. It will no longer be calculated on a APF rate but a new fixed daily rate. This will put my over draft charges up to a potential £80 a month.

I am a self employed sole trader that is not vat registered (well under the threshold).
I have a Business account for commercial clients and a personal account for domestic clients (i don't get charged using this account) with Barclays. Both of these will be affected by the changes.

My problem is that use the overdraft on a daily basis. Because i don't know how much money is coming in and when, i have an overdraft that covers all my fixed out going with a bit extra for unknowns. At the end of each month i pay all the money into this account to clear the overdraft, remaining monies will be paid into my offset mortgage account, or i have to move monies the other way if there is a shortfall.

It works in the complete opposite way to PAYE, i run the account empty to see how much i owe at the end of the month, as i can't afford to have money sitting in the account doing nothing.

I have a £3500 overdraft
I will run my account on average £-2100 at month end.
Current charges £5-15 per month
New charges
<£1000 -75p per day
<£2000 -£1.5 per day
>£2000 -£3.00 per day


I also do not have the option of visiting the bank every day to pay in money.

Are all the bank going to adopt this method of overdraft charging?
Is it worth changing banks?
Any better way to manage my money or are there any specialist self employed accounts out there?

Any ideas or help would be greatly appreciated.
I never hear about how changes will or won't affect the self employed, we seem to be ignored by the media, politicians and banks.
When i spoke to Barclays they said they had not encounter this scenario before. Surely there must be other people who use their account in this manner?


Many thanks

grumbler

It's not a challenge to balance on the edge of overdraft every moth.
Just transfer less to your mortgage until you create an extra 'buffer' in your current account that will stop you going overdrawn.

What interest rate are you paying on your mortgage? Santander 123 current account pays 3% gross in-credit interest that is possibly very close to what your mortgage costs you.

JKSandy

"Are all the bank going to adopt this method of overdraft charging?"

Most likely.

pooch

sellma wrote: »

Hi.
Looking for some advice on how to proceed in the future managing my bank account.

I have just been advised by Barclays of their policy change to their overdraft facilities. It will no longer be calculated on a APF rate but a new fixed daily rate. This will put my over draft charges up to a potential £80 a month.

I am a self employed sole trader that is not vat registered (well under the threshold).
I have a Business account for commercial clients and a personal account for domestic clients (i don't get charged using this account) with Barclays. Both of these will be affected by the changes.

My problem is that use the overdraft on a daily basis. Because i don't know how much money is coming in and when, i have an overdraft that covers all my fixed out going with a bit extra for unknowns. At the end of each month i pay all the money into this account to clear the overdraft, remaining monies will be paid into my offset mortgage account, or i have to move monies the other way if there is a shortfall.

It works in the complete opposite way to PAYE, i run the account empty to see how much i owe at the end of the month, as i can't afford to have money sitting in the account doing nothing.

I have a £3500 overdraft
I will run my account on average £-2100 at month end.
Current charges £5-15 per month
New charges
<£1000 -75p per day
<£2000 -£1.5 per day
>£2000 -£3.00 per day


I also do not have the option of visiting the bank every day to pay in money.

Are all the bank going to adopt this method of overdraft charging?
Is it worth changing banks?
Any better way to manage my money or are there any specialist self employed accounts out there?

Any ideas or help would be greatly appreciated.
I never hear about how changes will or won't affect the self employed, we seem to be ignored by the media, politicians and banks.
When i spoke to Barclays they said they had not encounter this scenario before. Surely there must be other people who use their account in this manner?


Many thanks

I'd have thought basic cash flow management / budgeting skills were an obvious, essential requirement for anyone considering self employment. Obviously I was wrong.

CreditCrunchie

I was confused by this too. I'm self employed and don't live in my overdraft Not that I'm judging, just struggling to understand.

CKhalvashi

Is the money going actually into the mortgage, or just into the savings part to offset the balance?

If the latter, I'd say you're probably better off removing the savings and placing them into this account so it's not going overdrawn.

In the days before we went Ltd, I used to pay myself a 'salary' at the end of each month, leave the rest of the money in the business account, and know I have enough to pay the tax bill and give myself a 'bonus' at the end of the year, so never using the overdraft facility that was there.

CK

trailingspouse

'It works in the complete opposite way to PAYE, i run the account empty to see how much i owe at the end of the month, as i can't afford to have money sitting in the account doing nothing.'

I'm not sure what this has got to do with PAYE, but I would absolutely say you can't afford to be paying out for overdraft charges every month.

How much do you pay in overdraft charges every year? That's coming off your bottom line for no good reason.

As a previous poster has said, build up a buffer so that you can run the account down to approaching zero every month. You'd be doing basically what you're doing now, but without incurring charges. You don't want the money to be sat doing nothing - well, it wouldn't be doing nothing, it would be saving you bank charges.

I wouldn't be happy to not pay money in regularly - do you just keep the cash in your home until you are able to get to the bank??