How quickly do I need to repay overdraft?

kmb500

Sorry this is the credit card forum but I can't see a forum for debit cards.


I have a question about going into my overdraft. I use it quite a lot but I have a lot of money needing to be paid in the next couple months. What happens if I keep using my overdraft? What if I stay in it for too long? Up until now I've been clearing it all when I get paid every month but what happens. There is an interest rate shown on my bank account for the overdraft but I don't understand how it works.


Please can anyone explain it to me thank you. I have a TSB Classic+ account if that helps.

[Deleted User]

You should get out of it as quickly as you can.

You have to get out if when they tell you to, which is whenever they fee like it.

Ebe_Scrooge

If you're regularly using your overdraft, this would imply you're living beyond your means. The first thing to do is try and reduce your outgoings so that you can live on your income each month.


That aside, using your overdraft all the time means you're paying fees/interest every month, money that you could be spending elsewhere. Also, it will have a small negative affect on your credit history - if you wanted to apply for any form of credit in the future, the lender will look at your file, see that you regularly rely on your overdraft, and ( rightly or wrongly ) come to the conclusion that you're struggling. It's not as massive a problem as having defaults or such-like on your file, but as I say it's a small "negative marker".


Overdrafts are usually a relatively small amount. It really would be worthwhile living really frugally for a couple of months, and clearing it off. You can then use the fees/interest you're saving every month to treat yourself to a takeaway or whatever

bertiewhite

I was DEEP into my overdraft with Natwest for at least a couple of years, so much so that even when I got paid, I was still overdrawn and not once did the bank contact me about it. My wife was constantly into her OD with HSBC as well.

I'm not saying it's ok to use it constantly but I'm just pointing out that depending on the bank, I doubt they'll be pestering you about it as long as there's a regular amount being paid in to your account.

PeacefulWaters

Cut back a bit. Build up a savings buffer. Then you never need to go overdrawn and never have to pay interest / fees.

Ebe_Scrooge

bertiewhite wrote: »

I'm not saying it's ok to use it constantly but I'm just pointing out that depending on the bank, I doubt they'll be pestering you about it as long as there's a regular amount being paid in to your account.

You're right there - as long as you appear to be making regular payments into your account, the bank love it as they're making money from you


But as ZX81 says, it's not unknown for a bank to suddenly withdraw the overdraft facility and demand instant payment of the debt. Maybe unlikely, but it's a possibility.

kmb500

Ebe_Scrooge wrote: »

If you're regularly using your overdraft, this would imply you're living beyond your means. The first thing to do is try and reduce your outgoings so that you can live on your income each month.
Overdrafts are usually a relatively small amount. It really would be worthwhile living really frugally for a couple of months, and clearing it off. You can then use the fees/interest you're saving every month to treat yourself to a takeaway or whatever

It's only a temporary measure. I earn £1300/month and at the start of the month I pay all my bills. This is currently about £1200 in bills at the moment. Hence I am using my overdraft. I don't mind paying a tenner a month to use it but I have to, there is no other way around it. My bills will stop being so insane in 3 months time

SHill

Look see if you can apply for a money transfer card pay off the over draft and add a positive balance. Do this when you are close to your pay day. So you get positive balance.
Now sit down with you partner and do some maths look through all your out goings and hidden treats and secret hidden treats.
Take pack lunches to work and cut down on purchase you cannot afford.
the aim is now to pay off the money transfer at a better % you can handle rather than % interest the banks are charging you on your over drafts.
Hope this helps

Anthorn

kmb500 wrote: »

Sorry this is the credit card forum but I can't see a forum for debit cards.


I have a question about going into my overdraft. I use it quite a lot but I have a lot of money needing to be paid in the next couple months. What happens if I keep using my overdraft? What if I stay in it for too long? Up until now I've been clearing it all when I get paid every month but what happens. There is an interest rate shown on my bank account for the overdraft but I don't understand how it works.


Please can anyone explain it to me thank you. I have a TSB Classic+ account if that helps.

The cost of the overdraft, i.e. interest, aside it depends on the Bank: In my own personal experience Lloyds bank, TSB and Co-operative Bank regard an overdraft as a short-term loan. In fact they drop hints to that effect in their blurb. All three don't like customers who are perpetually overdrawn, effectively living off their overdraft.

I think the difference is whether the overdraft is reducing month-to-month or staying at the same amount due to spending the same amount that was paid off. In the latter case, probably the bank will at least be thinking of withdrawing the overdraft or reducing the limit or even closing the entire account.

To cut a long story short, make sure the overdrawn balance is reducing month to month and pay it off as soon as you can.

Marcio45

I lived on my overdraft for many years, simply because my income was equal to my bills/spending, plus emergencies, so i was always on the red. My overdraft limit got to 3 times my monthly wages. The bank even increased my overdraft every year at the time.
I did managed to deal with this, by raising my income and reducing expenses, and now live (mostly) within my means.
My credit score - worth what is worth - has always been low and still is. I have an impecable credit report, no defaults or even late payments, for the last decade. I have opened a few credit accounts in the last year without problem. And my current credit cards keep increasing the limits.
The effect of using overdrafts on your credit rating can be significant, particulary if it is as large as mine was. Maybee even more than having a high credit card balance.

Bird.Heart.Mouse

bertiewhite wrote: »

I was DEEP into my overdraft with Natwest for at least a couple of years, so much so that even when I got paid, I was still overdrawn and not once did the bank contact me about it. My wife was constantly into her OD with HSBC as well.

I'm not saying it's ok to use it constantly but I'm just pointing out that depending on the bank, I doubt they'll be pestering you about it as long as there's a regular amount being paid in to your account.

Hi kmb500

Lots of good advice on here already. I have been living in my overdraft facility for more years then I care to openly admit, but as bertiewhite and Ebe Scrooge point out, the bank don't seem to mind as long as:

a) You are continually paying into the account
b) Living a sufficient distance from the breadline that they can comfortably continue to charge you interest/fees!

From recent personal experience I would take a look at all your debts and make sure you are focused on the most expensive, working your way through to the least expensive (this may simply be your OD).

You could also work out your budget for the month (income - all outgoings/savings = disposable income) and then take a portion of your disposable cash to reduce the OD bit by bit. This is less of a hit on your spending money for the month, but means you are chipping away at the overdraft. £50 per month reduction is the amount I have allocated - do what works for you.

Bird x


PS: I spoke with Lloyds Bank today who were more then happy to regularly reduce my ODs by the amount and frequency of my choosing - they said all I needed to do was call when ready. Good luck with whatever you decide to do.