Should I clear overdraft with money transfer

lizziegizabit

Hi I'm after some advice if anyone can help.
I have an overdraft on my Barclays bank account and have basically been more or less up to my limit for the last 5/6 years and not really had the opportunity to clear it due to one thing or another, have gotten close a couple of times and then the washing machine needed fixing, tyres needed replacing etc, etc. Obviously the last few months have been a blessing with a reduced fee and that extra saving has really helped, but come next week I'm going to be charged the new interest charges. I currently have 2 CCs both do have balances on them but not anywhere near their limits. 
Virgin Money - limit £3800 balance £1400 @ 0% purchase ends March 2021
M&S Bank - limit £5500 balance £2200 0% purchase ends February 2022
Barclays o/d currently £1690 (had message saying will confirm new rates 10/08/20)
I think my o/d will go up to the 35%.
My thinking is if I do a balance transfer from Virgin to M&S who are currently offering me 0% bt until 08/21 and then do a money transfer of £2000 from Virgin to Barclays at 20.8% 5% fee I will at least be on an even keel with bank account come next payday. I have just gone full time at work and so my pay will be double from this month and so am planning to use the extra to clear both cards by Feb next year.
Sorry if this is long and seems over complicated or unexplainable is my first post (and I'm using my phone) but any advice would be brilliant or if there is a more straightforward route to take then even more so. 
Thanks for the understanding.

coachman12

The foremost advice , before you look at how to stick band-aids on now, is to get out out of the 5 or 6 year habit of living far too close to your limit. You need to sit down and devise a plan for economy.
Then stick to it and start putting the new money which you will save.......into paying off CCs and then in due course into a savings account.
In the meantime, depending on the 0% deals' details, get your bank account to a completely safe position and keep it there while you are saving to pay off your cards in real terms ( not just the minimum amount per month ) and then moving on to a savings account instead of living above your means. Hope you can find plenty of areas in which to cut down unnecessary expenditure so you can achieve the goal as soon as possible. Good luck and all the very best, lizzie.

cymruchris

If you can juggle the finances to pay less interest - then yes it's a sensible move to make - however as mentioned above - there's an underlying cause that needs to be addressed. Have you had a chance to really, really, really sit down and have a look at what you spend your money on to see if there are any savings to be made? Even if it's £5 here and £10 there? It soon adds up.

Do you pay high prices for super duper fast broadband? Or do you have big Sky packages? Maybe large mobile contracts? Do you have a takeaway every Friday? Are you a Starbucks loyalty card holder that earns regular free drinks? I'm not saying you're living to excess - but it may be that some things you take for granted every day that you see as 'affordable' might be causing you to end up dipping into the overdraft rather than having the savings put to one side to deal with the emergencies.

You need to get yourself in a position in the short term that you have a monthly surplus that pays off these debts, and then long term, that same surplus goes into a savings account for when that washing machine breaks down, or those tyres need replacing. 

lizziegizabit

Thanks both, as I mentioned I have gone full time to 37 hours from 18 and so salary will double from this month and I am planning on clearing the balances by February of next year with the extra pay and then start saving. I'm not going to miss what I've never had before for an extra few months but just want to get this O/D cleared ready so my wages are effectively my own from next payday and then start from there. 
I'm just unsure whether to do money transfer from Virgin before doing a balance transfer due to utilisation of available credit, it's taken me so long to get my credit up to excellent and don't know if having a higher utilisation on 1 card would be detrimental to it or be better to have it remain spread over the 2 cards.
Hope that makes sense.
Thanks again 

phillw

lizziegizabit said:

Sorry if this is long and seems over complicated or unexplainable is my first post (and I'm using my phone) but any advice would be brilliant or if there is a more straightforward route to take then even more so. 
Thanks for the understanding.

My advice would be to look at the total cost of repaying your debts and aim towards that then trying to make one account balance 0.00 while inflating the others by a greater amount.
My strategy was to create a spreadsheet with rows for anything to do with money (bank accounts, credit cards, euros, money in my wallet, nectar points, mortgage, utility account etc) and then add a new column each month. The total at the bottom of your spreadsheet is how much money you have (or don't have). You then have one number to think about & you can see how it goes up and down each month by looking at each column.
If the number at the bottom is negative then it doesn't matter what your bank balance is, it is not effectively your own.
Certainly run the numbers to figure if paying 5% to borrow money off your credit card is cheaper than paying the overdraft fees.

cymruchris

lizziegizabit said:

Thanks both, as I mentioned I have gone full time to 37 hours from 18 and so salary will double from this month and I am planning on clearing the balances by February of next year with the extra pay and then start saving. I'm not going to miss what I've never had before for an extra few months but just want to get this O/D cleared ready so my wages are effectively my own from next payday and then start from there. 
I'm just unsure whether to do money transfer from Virgin before doing a balance transfer due to utilisation of available credit, it's taken me so long to get my credit up to excellent and don't know if having a higher utilisation on 1 card would be detrimental to it or be better to have it remain spread over the 2 cards.
Hope that makes sense.
Thanks again 

It’s good that your salary has increased - and you can pay down the debt faster - but you should still have a good long hard look at your expenditure for potential savings. There are still easy ways to save money if you’re on the top package of anything, or beyond the minimum contract of anything. You didn’t mention whether or not you’ve reviewed your spend to see if additional savings can be made. 

Emmia

You owe £5,290 between 2 credit cards and an overdraft, and I'm presuming you've run this debt up as you don't have any savings to cover off "emergencies" like car tyres, washing machine repairs...

Unfortunately it seems (as others have said) that you've been living above your means to the tune of about £1k per year - not a massive amount admittedly, but something which will build into something unrecoverable unless you really look at your day to day expenditure to find those little cost savings...

Long term, reducing your current spending by £100 a month, £20 - £25 a week or £3 - £4 a day would help you to live within your means, and start to build a savings pot which would make you less reliant on credit for emergencies - it's hard, but sometimes focusing on the smaller weekly or monthly goals can really help to change habits, and tackle the bigger problem. 

if you do go down the route of moving the overdraft onto your credit cards, you also need to reduce the availability of that overdraft, ideally down to nothing.. (but perhaps a small £100 buffer) this is essential to stop you spending it again, and getting yourself back to either square 1 or an even worse position. 

Best of luck.