Student overdraft now not interest free

Jh3

Hello!

Just looking for some advice on what is the best thing to do. I had a Natwest student account 2009-12, then went on to do an MSc so was able to extend it for 1 year. The bank confused me a little during this, and I'm still not exactly sure when it changed to a graduate account. I assume it was January 14, which isn't bad considering I finished my course in September 13.
I received an email a few weeks ago to say that from January I'd be charged interest on anything above £1000 of my overdraft. The interest rate is 17.81%. I know nothing about overdraft charges but that seems steep!
I finished my MSc and got quite a low paid job for some experience, so didn't really have the funds to prioritise paying off my overdraft. I was also paying off the last of my MSc course fees, which I proudly managed to pay myself (another reason I couldn't pay off the overdraft). I then got a better paid job and decided to buy a house, which didn't leave room for paying it off either. So I'm now in a situation where I've got a 1600 overdraft limit which I pretty much use at it's limit every month, a beautiful house and a long way to go to get it down to 1000!
Is the best option to:
reduce the overdraft in chunks as and when
Take out a lower interest loan and pay it all off
Take out a 0% credit card and balance transfer (I haven't got a credit card and have never had one, so am not clear on how this works!)

Thanks in advance for any help!

CLAPTON

Jh3 wrote: »

Hello!

Just looking for some advice on what is the best thing to do. I had a Natwest student account 2009-12, then went on to do an MSc so was able to extend it for 1 year. The bank confused me a little during this, and I'm still not exactly sure when it changed to a graduate account. I assume it was January 14, which isn't bad considering I finished my course in September 13.
I received an email a few weeks ago to say that from January I'd be charged interest on anything above £1000 of my overdraft. The interest rate is 17.81%. I know nothing about overdraft charges but that seems steep!
I finished my MSc and got quite a low paid job for some experience, so didn't really have the funds to prioritise paying off my overdraft. I was also paying off the last of my MSc course fees, which I proudly managed to pay myself (another reason I couldn't pay off the overdraft). I then got a better paid job and decided to buy a house, which didn't leave room for paying it off either. So I'm now in a situation where I've got a 1600 overdraft limit which I pretty much use at it's limit every month, a beautiful house and a long way to go to get it down to 1000!
Is the best option to:
reduce the overdraft in chunks as and when
Take out a lower interest loan and pay it all off
Take out a 0% credit card and balance transfer (I haven't got a credit card and have never had one, so am not clear on how this works!)

Thanks in advance for any help!

assuming this is your main account then you can reduce your OD by simply not spending as much


if the average overdraft is 1,600 over the month (unlikely if your salary is going into it) and you pay 17.81% APR on the amount over 1000 then your interest will be
600 x 17.81% /12 approx. i.e. £8.9 per month (are there any fees attached as well). If the OD varies over the month then
interest will be less as the interest accrues on the daily balance.


personally to take out a loan to save 8.90 per month seems a little excessive.


it is wise (if you can control spending) to take out a CC and use it regularly for normal spending and then pay in full each month. This will have the benefit of reducing your running OD for a period and so reducing the interest.


You could try for a 0% CC on purchases but if you haven't ever had a CC then you may be unsuccessful but you can try.

thebritishbloke

I doubt you'll be accepted for a 0% card, given that you've never had a CC before. If you do want to try, make sure you go for a card that offers "money transfers", they are different to balance transfers in that they let you send money to your bank account for a fee, and then it sits at 0%.

You need to just spend less money each month. Granted it's hindsight, but you should have paid off debts before you decided to dive in and buy a house.

Once you pay off the overdraft, make sure you reduce the limit to say £100, so that you don't get tempted to dive into it again.

Sharon87

The interest isn't that steep, just be thankful you're not with a bank like Halifax that charges £1 per day for using the overdraft!

You can attempt at getting a 0% credit card for purchases, using that for general spends instead of your wages, but that's not guaranteed. Also you may be tempted to spend more (like I did in the same situation) and get into more debt. You need will power to not spend more for this to work.

Another option is to open another account, but keep you wages/direct debits with your other bank or the overdraft could be taken away. Then transfer what you want to spend each week into the other account, if you budget to pay off a set amount of your overdraft per month then you know how much you can spend.

knack92

Here is the page for NatWest graduate overdraft: http://personal.natwest.com/personal/current-accounts/compare-current-accounts/graduate-account.html which confirms that the the interest free amount drops to £1000 in Year 2.

Bear in mind that the interest free amount will reduce to zero after Year 2 so you will need to clear another £1000 before then.

This page has further details on the overdraft and when the preferential terms expire: http://personal.natwest.com/personal/current-accounts/rates-and-charges/current-account-rates-and-charges-before-4-july-2011.html#interestDue

From the wording it's not entirely clear to me when you will lose the full interest free amount: "If you graduate from 1 January 2013 onwards, the package is available for up to 2 years and the preferential terms expire at the end of June in the second year after graduation."