Best way to pay off Overdraft?

paul9619

Hi all,

I currently have a Barclays Additions Plus current account. My overdraft Limit is £1800 and I usually use about £1600 worth of it a month. I am now looking to clear it this following year. Barclays charge an EAR of 9.9% at the moment on my overdraft.

What did you think will be the best way for me to clear it?
I was thinking maybe by getting a 0% credit card or something like that?

Cheers

SalsaDanca

Most credit cards won't do a 0% balance transfer to a current account, only to other credit cards. Have a look at the stoozing subforum of the credit cards forum for up-to-date information, but I think Virgin and Egg cards both do 0% balance transfers to your current account.

The regular posters in the Debt Free Wannabe forum can help you put together a budget and cut down on your outgoings, so you can pay the debt off sooner.

YorkshireBoy

paul9619 wrote: »

What did you think will be the best way for me to clear it?

In simple terms?...earn more and/or spend less! Let me explain...

If you had a static balance of -£1,600 you'll pay roughly £12 per month debit interest at 9.9% EAR. In practice, most people's overdraft usage varies throughout the month as their salary hits and they spend money.

Assuming you have £1,000 credited to the account each month, and you spend linearly, then your average balance might be £1,100 meaning your debit interest charged would be around £8.68.

If you transfer a £1,600 overdraft to an MBNA card you'll straightaway pay a BT fee of £48 meaning it could be many months before you 'break even'. You then have £25 per month minimum payments to find from somewhere. Where will this come from?...the overdraft facility again? In a whole year, you may only reduce your overdraft by £200...and if you say you'll do more than that, then I'll say why haven't you done it sooner then?

One final point...if you break the credit card agreement they'll revert your account to the standard rate, typically 1.5 to 2 times higher than your current overdraft EAR.

I'm afraid it's reality check time...you're spending too much/not earning enough.

I feel credit cards are not the answer to your problem. Get yourself over to the debt-free wannabe and old-style boards for some advice on living within your means.


EDIT: Do you really get £14.50 a month benefit from your current account? Have you considered downgrading?

jamesd

A 0% for spending credit card and switching your spending to that card so the cash you're not spending clears your overdraft is one way to go about this. No balance transfer required since you're just moving your spending to the 0% card.

paul9619

Cheers for replies guys.

I think I fall into the "Far to frivilous with my money" category and I'll pop over and get some advice on living within my means This should in turn see my overdraft drop considerably if all go's well.

As for the Barclays additions plus charge of £14.50, I use this to give me my fully comprehensive breakdown cover (with Roadside, Recovery, At home, Onward Travel & European cover) with the RAC. I think this pretty much covers the charge along with a few other benefits such as 9.9% EAR on my overdraft.

Debt_Free_Chick

Isn't it the case that most (if not all) balance transfers now incur a handling fee? So it might be 0% interest, but you pay back more than what you borrow...?

Another way to clear it is simply to cut your monthly spending by £x e.g. spend £100 less this month than you normally do. Your overdraft will reduce by £100. Do the same next month ... and for the following ten months and you'll have no overdraft.

This example doesn't work precisely, as I haven't factored in the cost of the interest on the outstanding overdraft, but it's "close".

RayWolfe

paul9619 wrote: »

As for the Barclays additions plus charge of £14.50, I use this to give me my fully comprehensive breakdown cover (with Roadside, Recovery, At home, Onward Travel & European cover) with the RAC.

Would the RAC charge you £174 a year?
Last time I got quotes for that sort of thing the rates varied between £39 and £79.
I you take this much care (not) on your spending, this could indicate one of the reasons you live on overdrafts

flower123456

Hi

Can i ask you something about your barclays overdraft? Was yours only available for a year? If so, what happened?

My barclays overdraft letter says its available until May 2nd 2008 so I would have had it for a year. Im the same as you and use £1600 of an £1890 overdraft.

Im worried they wont reinstate it and Ill be in a mess. I aim to clear it by the end of the year but not by May 2008.

Any advice would be great.

Thanks

20SomethingStruggling

Ok I need help here.
Im only 20 turn 21 next month and when I was in the transition of moving back in with my folks from my own place & lost my job I took out an overdraft of £2200. I am now back in full time work again but I'm, struggling to live month to month with all of my bills and really just want to get rid of this overdraft now. Because of my age its unlikely that i'll be able to get a credit card, and even if I could I dont understand them. Can anyone advise me on what to do? I bring home around £1100 a month but my bills leave me very little and at the moment I have no savings at all. I need help please someone finance savy.

opinions4u

Spend less for starters.

Go to www.makesenseofcards.co.uk. Complete a statement of affairs (SOA). Post that on the Debt-free Wannabe part of this forum and ask for help. While waiting, challenge every line of expenditure to remove it or reduce it.

A couple of starters: cut back on entertainment, lunch / coffee and mobile phone costs.

Don't rule out eBay or a car boot sale to help reduce your debt.

dshart

If you are going the same amount into your overdraft monthly it means your income and outgoings are roughly equal, this has good and bad points. The good point is you only have to make small savings to start getting into credit each month. The bad side is if you have any unexpected expenses it will put you deeper in debt.

Overdrafts are only really good to cover unexpected expenses that can be quickly cleared off, if you regularly use them then it works out as a relatively expensive loan. The idea of taking out a 0% interest card could work, but make sure you do the figures and ensure you can clear it off before the 0% period expires.