What happens with an overdraft on a DMP?

Christopherrobin

Hello

I'm feeling really despondent today and just need somebody to explain this to me.

I went to a local building society to open a basic bank account but was unable to do so as the advisor I had a meeting with said her manager wouldn't sign off on the new account due to my overdraft as I had no way to pay it. I explained I was entering a DMP with a debt charity but she said the only way I could do it would be to transfer the overdraft to them and have a reducing overdraft which reduces by £100 per month.

I was at a loss to explain how I would pay the overdraft as the truth is I don't know. I had assumed once the new account was operating I would transfer one complete wage, tax credit, child benefit over and that would be 'my' money for the new account. Then what was left would be a debt for the DMP. The advisor said I couldn't open an account with them and leave that debt as it would be like walking away from the debt. I came away so upset and humiliated as I'm not trying to forget the debt. The woman was lovely and said I was doing the right thing consolidating the debt and dealing with it but in terms of the rules of that Building Society she couldn't do it, she is going to speak to her manager to see if something can be done. This is a local Building Society with only around 5 branches so perhaps I would be better off with a national company?

I have the overdraft with HSBC and credit cards with Halifax, Mint, MBNA and Capital One. I know that rules out RBS and I think Nat West and Lloyds? There is a Santander local but I would have to travel to Barclays and it's not really practical for me. Could I do it online through Co-op even if there are no branches near me?

January2015

Our Hellifax OD was included in our DMP.

We opened new basic bank accounts - all done completely online - with Nationwide. We just arranged to transfer our salaries into our new basic accounts and the OD with Hellifax is paid off at a few pounds each month via StepChange DMP.

SquirrelNuts

Hi CR

I have an overdraft with Lloyds which is in my DMP.

I opened a new current account online with Santander no problems at all. You dont need to transfer the current overdrawn balance into your new account.

cheers
Squiz

sourcrates

Building society's tend to have different rules to banks, try a bank, that you have no debt with, you won't have this problem again.

You are right in that coop do a good basic account, which includes a debt card, not a cash card, you can apply online, but you do need to take ID into a branch.
All banks do basic accounts, they won't be advertised, so you need to look for them.

Christopherrobin

Hi, thanks for the replies. I may try Santander as I don't think any of the credit card providers have links to them. I didn't realise I could apply online and just take ID into a branch, that would be better for me.

I'm probably making it all more complicated than it needs to be but I am finding switching banks stressful. It would be nice to use the switching service as I am dreading informing everyone and changing direct debits. I am scared because my tax credits go in a couple of weeks after wages and child benefit a different time again, I'm scared HSBC will keep some.

mum2one

what ever you do, DO NOT USE THE SWITCHING SERVICE - you may well have direct debits to move.

I was in same position as you, but with halifax, (credit card, loan, od), I opened a new account with Natwest - cancelled my dds then rang the companies / reset up on line myself, all done.

when it came to the "did I want switching service2 just clicked no.

I know halifax is in with lloyds, I'm not sure about TSB, or try M&S.

I dont know how far you are with the dmp, I didnt send any letters till I had the new account, as soon as I had that number, I rang tax credits etc and changed accounts,

Good luck with it all x

andy1886

Ring your dmp provider and explain you didnot include the overdraft in your original plan but need to add it now . It does mean your creditors will each get smaller payments . You can then as others have said open a basic bank account and there are various providers who operate them . I have done exactly that myself and opened a co-op cashminder account with no problems but did do it in branch , it comes with online facilities and a debit card .

sourcrates

You can't use the switching service when you have an outstanding overdraught with your old bank.
You must open a new basic account as a new customer, because if you do try to use it, the application will fail as you have outstanding debt with your old bank.

You don't need to tell your creditors a think about changing banks, you simply request they set up a new DD using the new details, that's it.
When your tax credits go into your existing account simply withdraw or transfer to your new one, if it's too late to stop them going in, the bank will not "take the money" using any offset rights, they simply don't work that quickly, and would only usually take money from an account with a credit balance not a debt balance, as it only exists in that account, and so is not real money.

Your overthinking this a little to be honest, and worrying about things that can't happen.
Relax !!!

http://www.moneysavingexpert.com/banking/setting-off

Christopherrobin

Thank you for your replies.

To the person who said I am overthinking it, you couldn't be more right? I am under a great deal of stress and getting very panicky about how things will work practically.

I think the problem with the Building Society was that she was talking about a switching service. It would be very nice to have somebody take all the hassle, but in my circumstances I will have to make all the phone calls myself.

I am going to try tomorrow to open a basic account with Barclays, I can only find a link to apply in branch with the basic not online. Then once I have the account number I will inform work/tax credits/child benefit and start to inform everyone I make payments to. I stopped the minimum payment Direct Debits with the credit card companies a while back and set up standing orders with a fixed amount instead. I am just worried I am going to miss a payment somewhere.