Overdraft/day to day spending help

taylor86

Go easy on me, this is my first thread in this forum...

Me and oh have a £2750 overdraft on our main natwest current account. (This was £4000 but we have paid some off and had it reduced. We have used this overdraft constantly for the last 6 years, we are in it for most of the second part of the month. It has never really bothered us too much however things have now changed, we have realised the folly of our ways and we are having a financial overhaul now kids are here and income may reduce soon.

Anyway we are focused now on getting this paid off and cancelled ASAP. Any suggestions as the best way to do this? We have tried to just leave the money in there and slowly pay it off but honestly this hasn't worked. We are thinking of transferring more to our savings and pay off and reduce every time we get to £500?

My MBNA card that allows money transfers already has a balance on so can't use that.

Archi_Bald

taylor86 wrote: »

We are thinking of transferring more to our savings and pay off and reduce every time we get to £500?

My MBNA card that allows money transfers already has a balance on so can't use that.

You shouldn't have savings whilst you have debts, such as overdrafts, for the simple reason that the overdraft costs you a lot more than you get for your savings, i.e. you are losing money.

Options for getting rid of your overdraft

1. use your savings?
2. spend less - have you done an SOA, have you posted on the debtfree wannabe board?
3. earn more - any chance for a second job, overtime etc?
4. get a 0% super balance transfer card if you know you can pay it off before the card becomes chargeable?

taylor86

Sorry just to clarify I meant savings account, not savings, it is currently empty. The last few months we have been clearing a credit card. We have approx £500 a month (my part time wage) left over after bills and essential spends (hubby's wage). We have made huge cuts to our spending recently which is why we are able to use £500 a month to pay debt.

Honestly I don't think we are disciplined enough to leave the money in the overdraft account every month as it shows as 'available' balance and gets spent.

Archi_Bald

taylor86 wrote: »

Honestly I don't think we are disciplined enough to leave the money in the overdraft account every month as it shows as 'available' balance and gets spent.

If you can't manage self control, you will forever be stuck with debts, and pay the banks for overdrafts and loans.

You have been doing well so far, can't you just ignore "available balance" and live with your real available balance? Which you can track in a spreadsheet or on a piece of paper.

Some banks offer a "control" account, where they won't let you go overdrawn. I think Natwest and Lloyds do, but they charge you for it, and you still might get into trouble with bills that become due on fixed dates. Your only real option is to get rid of your debts, and then live within your means. That is how other people stay out of overdrafts. Life's a !!!!!....but I promise you, not having any debts is fantastic. Are you a regular on the debtfree wannabe board?

YorkshireBoy

taylor86 wrote: »

Honestly I don't think we are disciplined enough to leave the money in the overdraft account every month as it shows as 'available' balance and gets spent.

So don't look at it!...just check it once a month or so, say on payday.


Ditch the debit cards (some people freeze them in a block of ice I understand!?) and use cash for everything...either get a month's worth or a week's worth at a time.

taylor86

Yes you are right I need to just focus on the real balance not available balance. We have been so focused on some other debts but because we have ignored this one for so many years we just need to change our way of thinking. We have set ourselves a target of December to have the total paid off and I'm sure we can donut if we stay on track. I'm
Not a regular on that board, I'll get myself over there.

Thanks for your feedback, it is much appreciated.

taylor86

I like the cash suggestion, that does really work. I know it will be so satisfying to watch that -£££ going down.

101problems

Archi_Bald wrote: »

You shouldn't have savings whilst you have debts, such as overdrafts, for the simple reason that the overdraft costs you a lot more than you get for your savings, i.e. you are losing money.

Options for getting rid of your overdraft

1. use your savings?
2. spend less - have you done an SOA, have you posted on the debtfree wannabe board?
3. earn more - any chance for a second job, overtime etc?
4. get a 0% super balance transfer card if you know you can pay it off before the card becomes chargeable?

If natwest charge a% then you are absolutely correct not to look at saving then reducing the overdraft however if they charge a fee per day like my bank do then regardless of the size of your overdraft you will still pay the same so a savings account is in fact a good way to reduce your overdraft in chunks even despite the paltry amounts they pay in interest. If they charge a fee and a % like my other bank do it's time to get the spreadsheet out and work out which costs you less!
I have made this sound complicated but it really isn't

taylor86

Thanks 101 problems, they charge a percentage rather than a daily fee so I understand what your are saying. I wish I could just reduce it by £500 a month when my pay goes in but as far as I'm aware they do a credit search every time you reduce so this isn't really a great idea.

eskbanker

taylor86 wrote: »

Thanks 101 problems, they charge a percentage rather than a daily fee so I understand what your are saying. I wish I could just reduce it by £500 a month when my pay goes in but as far as I'm aware they do a credit search every time you reduce so this isn't really a great idea.

Even if it's true that there is a credit search done whenever the overdraft limit is reduced (and I'm not sure that's the case), the posters above aren't necessarily suggesting you reduce your limit as such, just reduce your overdraft itself. i.e. the actual amount you owe, hence the recommendation to concentrate on the real balance rather than a theoretically available one.