Student overdraft is going to begin charging interest

MrJester

Hi chaps and.. chapettes.

I have a large student overdraft. I am no longer a student, I haven't notified the bank of this at any point.
As of September they will begin charging overdraft fees daily for it. This will amount to somewhere near £50 a month just on fees.

I want to enquire whether this idea makes sense:

Currently I am thinking that it would make sense to create a new bank account with another provider - I've wanted to do this for a long time, but the overdraft has had me locked in - and with the account that still has an overdraft I would treat like another debt that needs money paid into it. Once it reaches an even 0, ask the bank to close the account.

As its a student overdraft, I do not believe I should be restricted to having to pay my salary into it(?) and can just stop using the account.

My first consideration is that I wouldn't be able to use a banking switching service, because that service is telling the current bank you wish to close; which would make them ask for every penny instantly, or I would require another bank to give me such a large overdraft (very much not likely).
Therefor could I just change my direct debits one by one myself (not that hard to do), and use a new bank account. Which one? I'm not yet sure, but there are some that give decent benefits for just paying in my salary. Should I look at Graduate bank accounts? Or again would that be bringing up issues with my status of having a Student bank account w/ overdraft somewhere else?

Thoughts, opinions, criticisms, all welcome. :money:

Happy Friday y'all.

PeacefulWaters

Does your current provider offer a graduate account?

If you stop funding an overdrawn account the bank will remove the overdraft facility, potentially increasing costs to you and damaging your credit file.

Proceed with caution. Ideally focus hard on clearing the debt fast.

MrJester

PeacefulWaters wrote: »

Does your current provider offer a graduate account?

If you stop funding an overdrawn account the bank will remove the overdraft facility, potentially increasing costs to you and damaging your credit file.

Proceed with caution. Ideally focus hard on clearing the debt fast.

I believe they do, are you thinking I could get myself an extension if I just updated my account?

If its an overdraft, that doesn't constitute 'overdrawn' (unagreed use of money) right?

PeacefulWaters

MrJester wrote: »

I believe they do, are you thinking I could get myself an extension if I just updated my account?

Exactly that.

If its an overdraft, that doesn't constitute 'overdrawn' (unagreed use of money) right?

I'm not sure I follow.

Let's say you have an agreed overdraft limit of £3,000 and end up with an overdrawn balance of £2,500 the day before payday. Not funding the account could lead to your £3,000 limit being removed, leaving you high and dry in expensive and credit file damaging unauthorised overdraft.

grumbler

MrJester wrote: »

I have a large student overdraft. ...
As of September they will begin charging overdraft fees daily for it....

I want to enquire whether this idea makes sense:

.... to create a new bank account with another provider -... and with the account that still has an overdraft I would treat like another debt that needs money paid into it. Once it reaches an even 0, ask the bank to close the account....

Doesn't make any sense to me.
I don't see how opening a new account can help you in any way.

Hutchch0920

Firstly read this article on graduate accounts:

http://www.moneysavingexpert.com/students/graduate-bank-accounts

Santander offer a £2k interest free OD for upto 3 years after you graduate.

Identify the best product for you and apply for it. Treat that interest free O/D as a ticking time bomb and work to get it shifted as quickly as possible before the grace period ends.

Thrugelmir

MrJester wrote: »

As of September they will begin charging overdraft fees daily for it. This will amount to somewhere near £50 a month just on fees.

Convert it into a loan nearer the time.

The way in which you handle the situation is going to have a bearing on your ability to obtain further credit in the future. Mortgages, car finance etc. Your choice whether to play by the rules or go your own way.

callum9999

grumbler wrote: »

Doesn't make any sense to me.
I don't see how opening a new account can help you in any way.

Firstly, you should always have more than one account (at different banking groups) anyway.

Secondly, the bank reducing the overdraft limit is one very good reason.

If the account is £2000 overdrawn and £1000 of wages go into it, it's not unheard of for the bank to then reduce the limit to £1000 - which means the OP has effectively lost their entire months wage. It would be better if they get the wage paid into a different account then paid whatever they could afford to reduce the overdraft. Or use my strategy - stick it in a savings account and only pay it back when they want to start charging interest. Though I'm fairly certain it's temporarily wrecked my credit report as I have thousands "owed" in overdrafts!

Granted they can lower or withdraw the overdraft at any time anyway, but I see this happening more often than just closing it down. It's a far more reasonable way for the bank to act.

KJSmith

MrJester wrote: »

As its a student overdraft, I do not believe I should be restricted to having to pay my salary into it(?) and can just stop using the account.

I would advise you not to do this. If you're not funding the account the bank is more likely to withdraw your agreed overdraft facility and require immediate repayment in full.

diamonds

Hutchch0920 wrote: »

Firstly read this article on graduate accounts:

http://www.moneysavingexpert.com/students/graduate-bank-accounts

Santander offer a £2k interest free OD for upto 3 years after you graduate.

Identify the best product for you and apply for it. Treat that interest free O/D as a ticking time bomb and work to get it shifted as quickly as possible before the grace period ends.

£56 a month for 3 years interest free loan, bargain!

MrJester

Barclays has a 'Higher Education' graduate account, but the details of which aren't clear at all so im not sure if they'd let me move onto it. I graduated mid 2014, so nearly two years ago now.