What to do with 500

SparklyH

Hi all 
Due  to lack of commuting to work I have more money this month. I am now out of overdraft (just)  I have £500 interest free until July. Normally it costs me £6/7pm to use it. My question is do I:
1) get rid of the o/d and feel better about not having negative numbers with the bank account. 
2) put it towards my big cc balance? 

I have a long term
pay off plan;  amounts are approx £17k on 0%s (at moment), £150 on 16% and
£1300 on6%
 I don’t know why I’m dithering really. I think I want to be in the black but this is currently the least expensive debt?!

ryanm8655

It’d make sense to use the 0% overdraft if you have a plan to get back out of it before it goes up to 40% again. But might not be worthwhile if potentially you’ll end up going over £500 or end up in a situation where you can’t get it back to zero.

Your call.

2022ismyyear

Hi @SparklyH

If you close the overdraft off the account is this really going to get rid of the issue to why you are going overdrawn every month. Yes short term it will be great because you have got rid of a debt but once lockdown is finish and you go back to work you might end up needing the extra breathing room again.

You have a few different options here but I would probably pay the £150 to the credit card charging 16% so that’s closed and currently charging the highest interest. Then I would reduce your overdraft but leave a buffer for yourself maybe £50 or £100 max so if you do need it you have something to fall back on.

I would then look at addressing the issue in hand to why you are living in your overdraft each month and how you can go about reducing your outgoings so going forward you have more available funds to use.

CreditCardJunkie

Pay off the overdraft and close it. 

SparklyH

I have been living in overdraft since I was unemployed 2 years  ago and because I have bigger more scary debts I’d never paid it off - this tipping into the black has happened because my budget for things is actually working  at the moment and thus have about £200/300 saved each month  from no transport costs at present.  

benbay001

If youre suggesting that you have the £500 due to the lack of commute then that would imply you drive 48000 miles per year.
(£500 at 40 MPG is 4000 miles per month using £1.15 per liter)
Id suggest thats unrealistic, and whats more likely is that not being able to go out has meant that you have also saved money in many other ways that you may not have been aware you were spending.
Take time to reflect on what youre not doing that you otherwise would have been, and if you keep some of it up after the lockdown is eased, you will find it much easier to get out of debt entirely. 

ryanm8655

benbay001 said:

If youre suggesting that you have the £500 due to the lack of commute then that would imply you drive 48000 miles per year.
(£500 at 40 MPG is 4000 miles per month using £1.15 per liter)
Id suggest thats unrealistic, and whats more likely is that not being able to go out has meant that you have also saved money in many other ways that you may not have been aware you were spending.
Take time to reflect on what youre not doing that you otherwise would have been, and if you keep some of it up after the lockdown is eased, you will find it much easier to get out of debt entirely. 

That’s assuming they don’t have to use the train or tube. My train ticket was about £650/month.

Though I think your general point is a good one. I’ve realised how much progress I could make by cutting down the entertainment, in particular.

SparklyH

I’m talking whole household commuting costs- 2 adults and 2 children getting the bus to school