Always in my overdraft! 29 September 2022 at 2:23PM in Debt-free wannabe 5 replies 671 views

WilliamHutton

Hello.

I always seem to be in my overdraft at the end of the month by £1,700 and have to use my credit card what sometimes ends up at £1400.

 I clear this all at the end of the month but seem to be in a loop hole.

 I’m earning good money but I’ve never been in debt like this.

I know I could pay monthly payments on my credit card but then there would be interest so I’m confused on what to do.

I’m trying to spend as little as I can to hopefully lower it down but it has worked yet.

Thanks.

WilliamHutton

Hasn’t worked yet*

Exodi

You need to write to provide a statement of affairs (https://www.lemonfool.co.uk/financecalculators/soa.php) if you wish for people to help you work out where money can be saved.

I'm a little confused about your comment of "I know I could pay monthly payments on my credit card but then there would be interest so I’m confused on what to do" as you will be paying interest on your credit card regardless of if you make a payment towards it or not (technically you'd be paying less interest if you're making payments). Though I'd hope you are at least making minimum payments as otherwise you are defaulting.

What is the APR on your credit card, and what bank is your planned overdraft with?

Overdrafts are usually one of the most expensive forms of credit, so you are likely paying a fair whack in interest every month.

theoretica

So you are clearing your credit card in full, but then respending on it?  So long as you can do that, it should be interest free borrowing, but you are correct that you have reached a point where you need to take action or you will get deeper into debt.

How much do you think you need to spend each month?

How much are you actually spending each month?

Why don't these match?

Ebe_Scrooge

Exodi said:

I'm a little confused about your comment of "I know I could pay monthly payments on my credit card but then there would be interest so I’m confused on what to do" as you will be paying interest on your credit card regardless of if you make a payment towards it or not

I assume the OP means they always pay their card in full every month.  And they know that they could pay only the minimum, allowing them to reduce the overdraft, but they'd then get charged interest on the card.

OP, you need to just break the cycle.  The sums involved are not enormous, and with a few months of determined effort I'm sure you can nail this.

Fill out a detailed SOA as mentioned above, this will allow you to see exactly what your income and expenditure are.  Keep a spending diary - record every penny you spend, the odd coffee or sandwich at lunchtime, the magazine or newspaper that you treat yourself to once a week, whatever.  These little bits all add up.  I'm willing to bet that if you do this, you'll suddenly see "Wow, I'm spending £20 a week on sandwiches from the supermarket, £10 a week on coffee", whatever it may be.  Lots of these odd fivers and tenners here and there really add up.

The bottom line is, cut out ALL unnecessary spending for a few months.  Sure, you'll feel like you're living like a hermit, but it'll repay you a thousand-fold in the long run.

Once you've got to the point where you can just use your credit card and comfortably clear it in full every month, and with no overdraft to worry about (and pay charges on!), you'll be in a much better position.

Oh, and I really would work hard to pay off the overdraft.  Not only does regular use of an overdraft reflect very negatively on your credit record (should you every be looking for credit again in the future), but a bank can actually remove the overdraft facility at any time and demand immediate and full repayment.

enthusiasticsaver

I would prioritise the overdraft over the credit card as they are usually much more expensive.  Try reducing the limit as you pay it off so you are not tempted to spend on it again.  There is no magic answer.  You simply need to either spend less or earn more. Try looking at all your outgoings to see where you can cut back.  Often people ignore the small cutbacks but added together they can make a real difference.  

Are there any direct debits or standing orders for subs etc you can cancel if you do not make good use of them?
If you are out of contract with mobile phone or satellite tv providers can you cancel or get it cheaper elsewhere?
Do you meal plan, use a budget supermarket and downgrade to essentials ranges rather than branded to save money?
Cut out or down on takeaways, coffees out, trips to the pub or restaurants/cinemas. Take sandwiches to work for  lunch rather than buying lunch out? 
2nd job particularly on the run up to Christmas?