Snowball dilemma - don't know what do do

Seaxwyn

Can anyone recommend my best approach to paying off my debts, as set out in my signature below.

I have been snowballing, so my first priority is CC2 in the list, followed by my Alliance & Leicester overdraft.

But I have now received an email from Alliance & Leicester explaining their new system for authorised overdrafts.

They will no longer charge interest but instead a fee of 50p per day, capped at 10 days per month, so the most you I would ever pay is £5/month, although my OD limit is £3750.

So does this change mean I should not now pay this OD off?

Help please, I can't work out what to do.

peb

help - you need a maths wizard (looks round - not one in here with me).
Lets see; we need to know:-
What interest are you currently paying on the overdraft?
If it is 0% how long does this last?
Are there other overdrafts which will now be cheaper?

£5 a month in itself does not seem to be much - it is on 3750 of debt - for comparision sake what is the interest on CC3?

In any event as you are so near to getting rid of CC2 it maybe psycologically better for you to pay it off first?

Sorry not a lot of help but it might get better minds than mine going!

hypno06

It certainly looks as though this now becomes lower on your list of priorites.

As long as the £5 you will be charged each month is less than the interest on any other commitment, then you should pay the others first.

Unless we are missing something blindingly obvious - £5 a month on a £3000 overdraft is a whole lot nicer than 5.9%!!

GeorgeUK

Personally, i'd phone them up to have them walk through it with me - just to make sure there is no confusion.

If you have read the terms of their new system correctly, then yes - the maximum "interest" will be £5 which is 0.205%

Definately need verification from their end - even just to make sure your overdraft is authorised and is not classed as unauthorised.

Fortheloveofmoney

I agree with Hypno. Based on your current OD (not the limit) it looks like an annual APR of 2.5% or 0.21 per month which is lower than the LOB at 3.9 or 0.325 per month.

Unlike a financial institution to make things better rather than worse

Seaxwyn

Thanks everyone.

This OD has been on 0% for a year - I opened the account last November - and was to have gone up to 5.9% next month.

I'm lucky that most of my debts are 0 or low interest - for comparison the interest I paid on my CCs last month was 0 on CC1, £3.65 on CC2 and £11.68 on CC3.

So £5/month for the OD seems a good deal but gives me no incentive to pay the darn thing off!

I am inclined to prioritise CC2 (you are right peb, that would be a huge morale boost) and save any extra money to either pay off CC1 when the 0% period ends, or possibly to put into my mortgage when the fixed rate ends on that next summer.

All advice gratefully received.

Fortheloveofmoney

Just having another think about this and it would appear that A&L are actually helping those with largish OD's and penalising those with £100 - £200 OD (charging 50p per day rather than the 49p it would be per month for those £100 overdrawn). So I guess they have more clients that are only just overdrawn rather than the likes of you and me that have larger OD's.

Sorry....rambling now.....just couldn't work out why they did what they did.

Seaxwyn

Hi fortheloveof money

I agree, it is quite hard to fathom out why they've done it. There are lots of people on the Current Accounts board who are furious about the change while I'm quite relieved.

You have done brilliantly reducing your debt by over 20k in 18 months - any tips to share?

Fortheloveofmoney

Hiya

I have an A&L account too but I didn't actually pay much attention to the new OD fees as I hope to have it all paid off by the time my 0% ends (fingers crossed!)

Thanks for your comments. I did put a thread on here a while ago about what I'd done. I'll see if I can find it.

Fortheloveofmoney

Here it is see post 12

http://forums.moneysavingexpert.com/showthread.html?t=572403

wok_boy

Fortheloveofmoney wrote: »

Hiya

I have an A&L account too but I didn't actually pay much attention to the new OD fees as I hope to have it all paid off by the time my 0% ends (fingers crossed!)

Thanks for your comments. I did put a thread on here a while ago about what I'd done. I'll see if I can find it.

Would it be this thread:

http://forums.moneysavingexpert.com/showthread.html?t=572403