To reduce overdraft limit or not...

fourthtimelucky

I posted this over on my diary page but thought I would ask here as well (apologies if you've now seen it twice)

Looking for a quick bit of advice if anyone can help;

Now things are getting on to an even keel and I am managing my money a lot better I was toying with the idea of reducing my overdraft. It is £900 at the moment and has been since I finished university many moons ago. I haven't been in it for over a year and feel I would benefit psychologically from reducing it.

Is there anything obvious I am missing when considering this?
- will it affect my credit/show as a search?
- could it be refused and withdrawn totally?

I bank with HSBC and the process of changing it appears to be an automated process.

All advice welcome...

EssexHebridean

It sounds to me like a really good idea for you to do this. Just one thing occurs to me though - do you have an emergency fund in place? If not, then I'd build that first off, and then gradually reduce the OD in line with it - so when the EF hits £200, reduce OD to £800. When the EF hits £500, reduce the OD to the same amount - see what I mean? That means that at a pinch, and in th event of things going horribly wrong, you do still have a 1k emergency pot in one way or another, without having to resort to CC's.

I'd also suggest not removing it altogether - having a small "cushion" in case of a bill coming out early, or a miscalculation, can be very handy and save on potentially expensive fees being charged.

Well done for getting things under control!

fourthtimelucky

Thanks for the reply EH. I have a little set aside but like that idea of reducing the OD whilst building up a more effective emergency fund.

As for getting under control; its been a long time coming but it feels really good. Never thought I'd be happy knowing how much I owe but it is quite liberating to see the number creep down month on month.