Advice appreciated on the best approach for managing my credit card and overdraft debt

fatbelly

Is there a difference between “money transfer”  “balance transfer” cards?

Yes. A money transfer card (with 0% deal) puts money straight into a current account at the cost of a small fee, usually 4%. The downsides are that fewer cards offer this and the 0% periods are shorter than BT cards.

They can be very useful if you can clear the balance within the free period. I once used one in a house purchase when things were getting tight. I was surprised how easily Virgin put 8k in my account.

The full into on them is here

https://www.moneysavingexpert.com/credit-cards/money-transfers/

MFWannabe

Note: To pay an overdraft you will need to get a money transfer card as that puts money into your bank account 
Not a balance transfer card as those are for transferring a balance from another card 

notation

I’m trying to pull the suggestions and advice I’m getting together, which I’m struggling with a bit, but the common and key points I think are these:

1) Reduce groceries expenditure.

2) Sort out what’s happening with buildings insurance?

3) Prioritise reducing overdraft balance by budgeting, economising and spending less.

4) It might be possible to get a 0% interest money transfer card to reduce some of the overdraft quicker?

5) Pay more than minimum payments on interest bearing credit cards and avoid using them

6) Maybe get a 0% interest balance transfer card which could be used to pay off these interest-bearing credit cards?

7) Perhaps opening up a second current account which is intended for general living expenses.  Leaving existing current account for direct debits, etc.

8) Open a savings account to put money in every month as an emergency fund.

Is this summary correct or am I missing things?

Many thanks!

MFWannabe

You’ve summed it up well except you need to get buildings and contents insurance as a priority; these really are essential 

Reference transfer cards check on here if you would get any: https://www.moneysavingexpert.com/eligibility/credit-cards/search/

Do you know how you manage to spend so much on groceries? Is it buying lunch at work? If it is then you need to take your own homemade 
same with evening meal, do you get takeaways? Ready meals? 

fatbelly

That's a good plan.

But on (8) I personally wouldn't be holding savings at a best possible 8% interest when I was still using an overdraft at 40%. You have the overdraft facility, and credit cards. 

The concept of an emergency fund works with a situation where you are walking away from your debts and letting them default, which you're not doing.

With 2200 income going into your current account each month that should be reducing the amount of interest you pay. Your first aim is to get that into a positive balance for at least prt of the month. (7) is going to slow that down so I'd hold fire on that.

enthusiasticsaver

I think that you have summed it up well.  

Where I and @fatbelly disagree is the concept of having a separate account for monthly living expenses.  He/she is correct in that keeping the main current account as low as possible by just having the one current account you minimise interest on the overdraft by keeping all your money in one place and reducing the overdraft for part of the month.  What I worry about is that if you keep just the one account it is easy to look at that overdraft limit and be tempted to spend up to it whereas taking monthly spends out of a separate account where you do not have an overdraft gets you used to living within a budget. Same issue really with emergency savings.  It helps you budget and stops you resorting to credit cards if something breaks.  If you throw everything at the debt and have no emergency savings that still leaves the possibility of you using cards open as you think to yourself well it is an emergency so it is ok to use the credit card. So it is more about the psychology of living without credit and within a budget rather than minimising interest.  Whichever  approach works for you but if you do decide to keep your main current account as your only account and spend from it during the month you need to be disciplined enough to reduce the limit or not go up to the limit every month otherwise you will still be in the same position in 6 months time. 

Coffeekup

notation said:

I’m trying to pull the suggestions and advice I’m getting together, which I’m struggling with a bit, but the common and key points I think are these:

1) Reduce groceries expenditure.

2) Sort out what’s happening with buildings insurance?

3) Prioritise reducing overdraft balance by budgeting, economising and spending less.

4) It might be possible to get a 0% interest money transfer card to reduce some of the overdraft quicker?

5) Pay more than minimum payments on interest bearing credit cards and avoid using them

6) Maybe get a 0% interest balance transfer card which could be used to pay off these interest-bearing credit cards?

7) Perhaps opening up a second current account which is intended for general living expenses.  Leaving existing current account for direct debits, etc.

8) Open a savings account to put money in every month as an emergency fund.

Is this summary correct or am I missing things?

Many thanks!

You got it, but as fatbelly said get the interest baring debts paid off first.
That being said I would open an account for birthday's and Christmas this will stop you spending on the cards when an event comes up. Write down who you buy for on their birthdays, allocate them a budget, total it all up and double that figure (for Christmas) round it up to the nearest 10 or 50 divide by 12... You then know how much needs to go in this account each month to treat everyone for gifts.

I'd also create a spreadsheet on your phone or get a diary and write in every spend you make on a daily basis because you need to figure out where that £300+ is going missing of your back up to your overdraft limit.

Have anything you could sell in the meantime to help reduce the debt by selling it on eBay, vinted or a local FB group. Console games, clothes, gym equipment, furniture or just general stuff you no longer use can help bring this debt down quicker.

Jamie Oliver has bucket loads of videos on youtoob, most of his meals are based around 15-30 minute cook times and are nutritious, tasty, cheap and the good thing about his meals are easy to mimic/make.
A bag of potatoes and 2-3 different veg will cost you less than £5 and you'll have at least 3 evening meals from that, just pour different gravies on them each time, you then only have to figure out another 4 nights food.

Good luck get that debt paid off, save some money and have the bank pay you interest instead.

Andyjflet

All brilliant advice on here and you seem that you are a logical person. You mentioned that you are getting slightly overwhelmed with the amount of things to do.

I thought it worth mentioning that I followed the Dave Ramsey 7 baby Steps method and managed to clear large debt in 4 years. This makes the steps easy, manageable and takes the pressure of you a bit, look out for his podcasts and you tube video bits, try to ignore some of the over the top US chatter!!

1. Save a £1,000 emergency fund
   
2. Pay off all debt (except your house) using the debt snowball method
3. Save 3-6 months of expenses in a fully funded emergency fund
4. Invest 15% of your household income for retirement
5. Save for your children’s college education   (if you have children)
6. Pay off your house early
7. Build wealth and give generously

Steps 4/5/6 can be done simultaneously. concentrate on Step 1 

Step Zero is to clear your overdraft and cut up your credit cards. 

katsu

Go on a comparison site and take out buildings insurance. It will be easier than you think and the main MSE site has info and links so you can follow them from the top of this page. 

I personally wouldn't go for the Dave Ramsey method in that focusing on debts from smallest to largest values isn't as efficient as paying off highest interest to lowest interest. 

Dave goes for simplicity not efficiency. 

I hope this helps

Good luck! 

EssexHebridean

Buildings AND contents insurance. Both are vital. 

I'm going to echo katsu on Dave Ramsey needing to be taken with a pinch of salt - he is very geared up to the American lifestyle and approach, and some of his methods don't translate too well to the UK. Here for example clear a mortgage before turning attentions to throwing additional funds beyond a standard pension at retirement is usually the recognised way forward.  Very good in theory, and he certainly has a way of focusing the mind, but the theory often doesn't match the practicalities of life on this side of the pond.