Should I opt for a bank account with a fee?

Rigsbyscat

HSBC are offering me to upgrade to Bank Account Plus for a monthly fee, but would I be be better off if I take advatage of this? I have an overdraft of £1,300 which I generally pay around £17 for per month. HSBC say that they give preferential overdraft rates for Plus customers, compared to the regular Bank Account*. The Bank Account Plus overdraft rate is 16.1% EAR variable.The monthly subscription is £12.95 (minimum contract 12 months, renewable monthly thereafter).

I need to know how to calculate whether ot not paying this monthly fee of £12.95 will save me any money on my overdraft each month? How do I work out if the APR for overdrafts with a bank account plus is better than without it?

Can any brainy mathematician explain how this is figured out please?

THANKYOU!

olly300

What is your current overdraft rate? Sorry found it it's 18.8%

CLAPTON

if you are paying 18.8% now and the Plus account is 16.1%

then on 1300 you are paying about £20.37 interest per month
and on the plus a/c you would be paying interest of about £17.44

so it a bad deal.

also, presumably you are aiming to clear the OD so you would then be paying 12.95 per month for nothing

PBA

Doing the maths slightly differently, if you're paying £17 a month at the moment you'd be paying about £14.56 a month at the Plus rate - not worth paying an extra £12.95 a month for. Even if it was a good deal, you'd be even better off switching to a bank like A&L or Abbey with much lower overdraft rates and no monthly fee.

Rigsbyscat

CLAPTON wrote: »

if you are paying 18.8% now and the Plus account is 16.1%

then on 1300 you are paying about £20.37 interest per month
and on the plus a/c you would be paying interest of about £17.44

so it a bad deal.

also, presumably you are aiming to clear the OD so you would then be paying 12.95 per month for nothing

I am aiming to repay my loan and credit card before I worry about clearing the overdraft, so I was thinking perhaps this plus account fee might be a temporary way to reduce the interest im paying on the overdraft if you see what I mean?

Rigsbyscat

PBA wrote: »

Doing the maths slightly differently, if you're paying £17 a month at the moment you'd be paying about £14.56 a month at the Plus rate - not worth paying an extra £12.95 a month for. Even if it was a good deal, you'd be even better off switching to a bank like A&L or Abbey with much lower overdraft rates and no monthly fee.

I also have an alliance and leicester account which I am taking advantage of the 0% interest overdraft on. Every penny counts as I have a loan, a credit crad and two overdrafts in place and I dont start earning my higher salary in my new job until February.

gt94sss2

Rigsbyscat wrote: »

I am aiming to repay my loan and credit card before I worry about clearing the overdraft, so I was thinking perhaps this plus account fee might be a temporary way to reduce the interest im paying on the overdraft if you see what I mean?

Just for reduced interest payments on the overdraft it doesn't seem worth upgrading your account with HSBC, unless you were also to take advantage of some of the other 'benefits' that HSBC offer Bank Account customers such as:

- Annual 10% interest refund of HSBC Credit Card interest you have paid
- cashback on HSBC Car/Home insurance
- 'free' travel insurance etc..

or if you planned to open a Regular Savings account (or similar) to benefit from the higher rate of interest HSBC pay on some savings accounts to 'plus' customers.

Regards
Sunil

CLAPTON

Rigsbyscat wrote: »

I am aiming to repay my loan and credit card before I worry about clearing the overdraft, so I was thinking perhaps this plus account fee might be a temporary way to reduce the interest im paying on the overdraft if you see what I mean?

No, once you include the monthly fee the amount you pay each month will go up not down so makes no sense whatsoever.

If you have several debts then its best to pay as much as possible each month on the one with the highest interest rate.

Rigsbyscat

Thank you all! As you can tell from my odd posts, I have no idea about how all this stuff is calculated hence why I am probably in debt and not managing my finances at all well. At my age it is really time I learned to understand all this and you and this website have been a huge help so far.