Moving from graduate account to the big scary world? help..

daze21

Hi,
I got a NatWest student account way back with a free rail card (yippeee) and a substantial overdraft. By the time I left uni (2010) this was a £2000 overdraft. the account became a graduate account about a year later. I got a pretty average job with my fairly below average degree and have been living in and around my overdraft for the last 5 years. The interest free amount slowly decreased whilst my money steadily remained at minus xxxx. Recently Natwest added on an extra 6 quid charge for using the overdraft facility in addition to the ~£20 interest I pay monthly meaning I spend £26 on nothing every month. Obviously #1 priority is getting the account to 0 ASAP.

My question is should I be doing anything else like switching banks or are they all just as evil as one another?

I recently started using a credit card and paying it in full at the end of the month which I am hoping helps reduce the interest charges slightly as well as my credit rating?

Any MSE advice would be most gratefully received.

BMN

There are a few different options available. You could look for a cheaper overdraft, move your spending onto a credit card with 0% on purchases or get a money transfer/super balance transfer from a credit card at 0%. Take a look at this MSE article: http://www.moneysavingexpert.com/loans/cut-loan-overdraft-costs

daze21 wrote: »

...or are they all just as evil as one another?

What was evil about Natwest offering you a free railcard and a fee and interest free overdraft for so many years? Welcome to the big scary world indeed.

System

Depends on how disciplined and your financial situation.

A 0% credit card that allows money balance transfers would be cheaper if you can pay off fully in around 29 months, otherwise there are similar cards but have a lowish interest rate of 6-10% until the balance is repaid.

eskbanker

daze21 wrote: »

Recently Natwest added on an extra 6 quid charge for using the overdraft facility in addition to the ~£20 interest I pay monthly meaning I spend £26 on nothing every month.

At the risk of being pedantic and labouring the point made in a previous post, you're not spending £26 on nothing every month, you're spending it on borrowing money from NatWest, and ultimately it just represents the continuing cost of whatever you spent the original £xxxx on! I don't mean that in a preachy way, but it doesn't seem reasonable to characterise NatWest as being evil for not lending money completely free on an ongoing basis....

[Deleted User]

Think yourself lucky that you're not with a bank that charges, say, £2 a day for being in your overdraft. At least if you're paying a %-age based rate, you're chipping away at the monthly cost by repaying some of it each month.

But to echo what others are saying, look at 0% cards for super-balance-transfers ("money transfers"), and work out how much you can throw each month at paying off the overdraft.

Also remember that if you switch banks, and you close the old account, Natwest are going to want that overdraft back from you in one go, so your new bank will have to be prepared to lend you that much from the off.

TartanSaver

Start budgeting properly and get yourself out of the overdraft. If you can afford to waste £26/mo on fees and interest (without snowballing into serious trouble) then you can afford to get out of your overdraft permanently! Scour the forums and site for ways to cut back your outgoings, and put some of them into action.

What exactly are you looking for from your bank? As above, "free money" is not particularly likely in any significant amount for a non student account - certainly not £2000.

For example, you could try switching to Halifax Reward for £100 switching bonus and £5 "interest" every month - but that only works if you never go overdrawn (and if you do, the fee is £1 a day.) Or you could set up a TSB Classic Plus and start earning 5% (gross on up to £2000) on any money in your account. Again though, the overdraft is going to cost you more than any interest takings if you go beyond the free £100 on offer.

Nationwide will give you a free overdraft for 1 year, but it's likely to be hundreds, not thousands. Also, it's a bit of a crime to waste the opportunity to earn the 5% interest (on £2500) which is only available for that same introductory year!

Fundamentally, if you're constantly overdrawn, the problem is not with your bank. Look to cut back, this is a moneysaving forum after all! Good luck.

daze21

Thanks for the advice. I think my main gripe is not the interest I pay on the amount but the £6 fee that didn't used to exist but now does. I guess when you sign up for uni you expect to be rich as soon as you graduate which is far from the truth.

I have every intention of paying the overdraft off within the year so long as nothing too unexpected comes along. I guess I didn't really think of it as credit at the time of signing up to uni as it was too easy to get the overdraft and certainly too easy to spend.

No Regrets though, I stand by my actions at uni and would not discourage anyone from enjoying themselves. I will look into one of these money transfers.

Is there any stipulation in changing bank accounts that prevent me from keeping the overdraft with Natwest whilst I pay it off and switching to a new account elsewhere for the bonus? (this would help nicely with paying it off)

daze21

BMN wrote: »

What was evil about Natwest offering you a free railcard and a fee and interest free overdraft for so many years? Welcome to the big scary world indeed.

It just seemed so easy, as I said the most annoying part is the revised charges.

eskbanker

daze21 wrote: »

Is there any stipulation in changing bank accounts that prevent me from keeping the overdraft with Natwest whilst I pay it off and switching to a new account elsewhere for the bonus?

Yes, as per post #5 above, if you switch to another account, NatWest will (understandably) insist on immediate repayment of your overdraft, so you'd need to ensure that your new bank was prepared to offer you an equivalent overdraft facility from day one.

TartanSaver

Re the above - you could open an additional account with NatWest (a basic one would be best) then switch that instead, allowing you to keep the debt with NatWest and claim a bonus. Halifax currently offering £100 and £40 extra through quidco, Clydesdale/Yorkshire offering £150, First Direct offering £125.

One caveat though - if you transfer your income away from NatWest there may be repercussions, eg they might withdraw the overdraft after a while. The account conditions might include a minimum payment in.

Good luck!

daze21

I was looking at switching the account and getting the bonus, I think I can realistically do this in 6 months or so if I follow a fairly strict budget. The £125 first direct switching bonus at the time would hopefully bring me at least within the 250 interest free they offer (which I would hopefully qualify for.

I got my bank statement through today and my moves to credit card etc. have saved me £7 in interest this month. Small gains.