Plan to Reduce Overdraft

shell88 · 16 January 2015 at 3:03PM

Hi,

I currently have an overdraft of £3330 on my account, my aim for this year is to clear it or at least reduce it significantly.

However I am not too sure what the best way of doing this would be. I have a poor credit score so I am not able to get a credit card that enables me to do a money transfer.

Is it possible to ring the bank each month and ask them to reduce it by a certain amount? (Can they do this if i am not out of my overdraft?).

Or could i save up an amount of money in my savings account and pay it off in a lump sum? The problem i have with this method is that i will be paying a lot of interest, currently £50/month.

Please help!

KirstyO · 16 January 2015 at 3:49PM

Hi shell,

I had an overdraft that I wanted to get rid of (it was part of my DMP - im not sure whether you're on this path or just wanting to get rid of the O/D?) and they agreed to reduce it automatically when I got below the next £100. It depends on the bank whether they could set up to do this auto for you or whether you will need to ring them every month.

Either way, if a short (free?) phone call every month gets you out of the overdraft and makes you feel better about your finances then surely its worth it?

The only way it would be worth saving a lump sum to pay it off would be if the savings account you kept the lump sum in earned you more than the interest/charges, which on a small amount is doubtful! By all means save if you have a bit of cash to do so (£5 a month is better than nothing) but these charges seem high, best off getting rid of this O/D and then seriously saving

Just my thoughts, others may have other ideas! Good luck! Keep us posted with how it's going.

suicidebob · 16 January 2015 at 3:55PM

The best way of doing this is to have a proper budget.

You get paid £1,000, you allocate £800 to various living expenses, and leave £200 in the account.

charmed1318 · 16 January 2015 at 4:03PM

You could get a basic bank account with another branch. Have your wages paid into there and pay off the OD each month by what you have bugeted. Speak to the bank you have the OD about the interest/charges, explain your situation.

greensalad · 16 January 2015 at 4:09PM

If you're worried about overspending because the money is "there", get one of those Kalixa free credit cards and put your weekly budget onto the credit card. You can do that each week for your full budget and then just leave your bank account card securely at home. When the money runs out, it runs out. But the good thing about weekly as that even if you spend it all by Thursday it's only until Monday you have to wait.