How do I get back in the black?

emylou

I am just returning (part time) from a year off Maternity Leave.We are lucky enough that my Mum is looking after our DS on the 3 days I'm working. For the last 3 months of my Mat leave I wasn't getting any money and I've gone into my overdraft So even when I get paid at end of January and my OH transfers money towards the bills we will still be overdrawn. Should I set up a new account for bills to go out from so the overdraft gradually goes down? I'm panicking Thanks in advance x

sourcrates

Hi emylou,


What I would do, if I wanted to get rid of my overdraught, and it was proving difficult, would be to open a new Basic Bank Account, which are now available to almost everyone, have all my DD`s etc transferred over, and arrange for any payments to go to my new account also.


You don't mention if you have any other debt, or what your credit file looks like, but basic accounts do not have any OD facility, nor do they require a credit check, for this reason you cant use a switching service, you have to do everything manually.


I would then set up a standing order to your old account, for an amount which would cover any charges, interest etc, plus an amount to repay the capital, and every month it should reduce your OD, until eventually it will be paid off.


If you just continue to use that account then it will prove hard to deal with it, but treat it like a separate debt, and you should be able to rid yourself off it.

getmore4less

Don't you have joint finances?

Look back at where your planning went wrong and make a plan for your new reduced part time income.

How much did the OH increase their contribution during the unpaid enhanced maternity? what is the planned increase going forward.

juggling money between accounts won't help if it is not enough to start with.

EssexHebridean

Hi emylou - it would probably be a plan for you to do your SOA and post here, you'd be surprised at some of the places where people can suggest savings! It sounds like you've caught the situation fairly early anyway, and with you and your OH working together you'll be able to get back on track. The idea of a basic bank account may also be a good one going forwards but you're probably not going to have the time to do that ready for your first months pay. I take it that what will go into, and come out of, the account you have this month will actually see a reduction in the overdraft overall? Otherwise there may be a bigger issue to be addressed...

tlc678910

Hi,
I just wanted to add that if the overdraft calculates interest based on what you owe (some don't and have a set daily charge) you will owe more interest each month if you move your account than if your wages are paid into the account and reduce the overdraft even if over the month you spend most of it again.

Is there a reason you can't pay off your overdraft by budgeting to be a bit less overdrawn each month?

Another option (if your overdraft is charging you interest and you can afford to clear the amount in a year or so) is a credit card that offers 0% money transfers. Pay off the overdraft and then pay the card monthly.

What interest does your overdraft charge?

greensalad

I've found the only successful way I ever paid off my OD was to not be using that same account as a current account. If you're spending in and out of it daily, it's so hard to stop.

I have managed to pay off a sizeable OD twice:

1) Moved money I was saving for the OD into another savings account. This isn't a financially sensible option because you're not saving anything on the OD interest BUT it does work. And you'll probably pay it off quicker in the long run. I saved up £1000 elsewhere then called up the bank, did the transfer and closed the OD there and then.

2) Move weekly spending budgets onto a different card. I got a mastercard. Topped it up with my budget for the week when I got paid. The amount in my current account stayed put and I was able to pay it off.

Another thing to note: Have you made sure you're getting the best rate/deal? First Direct offer the first £250 of your OD for free (no interest charges) and have a good rate. You can switch pretty easily nowadays.

emylou

Hi all, thanks for your replies. I will try to do a SOA in the next few days as finally feeling better after illness and looking after a poorly baby.

A couple of questions: I can't switch & make use of one of the offers of being paid to switch then due to credit checks? Or would that automatically close my current account?

First Direct give the first £250 of their overdraft interest free?

I definitely think the best thing for me is to open another account and look at the overdraft as a bill I need to pay off- thank you for your help!