Overdraft

lastbigspender

Hi

I have set a goal to clear my OD in 2026 which i thought might be a bit much but going to start trying to side hustle, learn more about personal finance (Psychology  of Money book ordered) and just be a bit more money savy.

I then thought to reviewed my OD interest over 2025 and it came to £585.01 😳😳😳 - that's 1/5 of my OD balance.

So I have looked at balance transfer cards for money transfers and found one 0% interest for 20 months (pre-approved) with 3.99% fee (£75).

This would equate to approx £130 per month which really would cost me £80 per month as my OD is costing me on average £50 per month.

This would definitely be manageable so any downsides in doing this??

Thanks

Gandalf644

lastbigspender said:

Hi

I have set a goal to clear my OD in 2026 which i thought might be a bit much but going to start trying to side hustle, learn more about personal finance (Psychology  of Money book ordered) and just be a bit more money savy.

I then thought to reviewed my OD interest over 2025 and it came to £585.01 😳😳😳 - that's 1/5 of my OD balance.

So I have looked at balance transfer cards for money transfers and found one 0% interest for 20 months (pre-approved) with 3.99% fee (£75).

This would equate to approx £130 per month which really would cost me £80 per month as my OD is costing me on average £50 per month.

This would definitely be manageable so any downsides in doing this??

Thanks

To clear an overdraft, you would need a Money Transfer card, not a Balance Transfer card. 

A Balance Transfer card can only be used to directly pay off a Credit Card (or occasionally a store card). 

A Money Transfer card will pay money into your current account to clear the overdraft (providing you get a high enough credit limit on the card). 

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

Woodstok2000

One possible risk is that you'll have your full overdraft available again, so there'll be a temptation to use it. Careful planning and discipline will be key. Good luck!

lastbigspender

Gandalf644 said:

lastbigspender said:

Hi

I have set a goal to clear my OD in 2026 which i thought might be a bit much but going to start trying to side hustle, learn more about personal finance (Psychology  of Money book ordered) and just be a bit more money savy.

I then thought to reviewed my OD interest over 2025 and it came to £585.01 😳😳😳 - that's 1/5 of my OD balance.

So I have looked at balance transfer cards for money transfers and found one 0% interest for 20 months (pre-approved) with 3.99% fee (£75).

This would equate to approx £130 per month which really would cost me £80 per month as my OD is costing me on average £50 per month.

This would definitely be manageable so any downsides in doing this??

Thanks

To clear an overdraft, you would need a Money Transfer card, not a Balance Transfer card. 

A Balance Transfer card can only be used to directly pay off a Credit Card (or occasionally a store card). 

A Money Transfer card will pay money into your current account to clear the overdraft (providing you get a high enough credit limit on the card). 

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

Apologies that's what I meant Money Transfer Card 😵‍💫😵‍💫

lastbigspender

Woodstok2000 said:

One possible risk is that you'll have your full overdraft available again, so there'll be a temptation to use it. Careful planning and discipline will be key. Good luck!

But then once cleared I could contact bank and asked to cancel OD?

Woodstok2000

lastbigspender said:

Woodstok2000 said:

One possible risk is that you'll have your full overdraft available again, so there'll be a temptation to use it. Careful planning and discipline will be key. Good luck!

But then once cleared I could contact bank and asked to cancel OD?

Good idea. 

Brie

A possible game plan would be to get the 0% MT card, whack all you can on to the OD and then reduce the overdraft as much as you can maybe leaving just a little wiggle room.  

Don't forget you need to get an credit limit high enough ideally to cover the entire amount of the OD plus the fee plus another 10% or so as they never let you BT or MT the entire amount.   So say your OD is £2k you need that plus the fee £79.80 plus a bit more, possibly looking for £2300?  Anything higher than that is just jam!

Consider also when you set up the DD for the card that you set it for a certain amount that will clear the entire balance within the offer term and do NOT use the card for anything else other than the transfer.

lastbigspender

Brie said:

A possible game plan would be to get the 0% MT card, whack all you can on to the OD and then reduce the overdraft as much as you can maybe leaving just a little wiggle room.  

Don't forget you need to get an credit limit high enough ideally to cover the entire amount of the OD plus the fee plus another 10% or so as they never let you BT or MT the entire amount.   So say your OD is £2k you need that plus the fee £79.80 plus a bit more, possibly looking for £2300?  Anything higher than that is just jam!

Consider also when you set up the DD for the card that you set it for a certain amount that will clear the entire balance within the offer term and do NOT use the card for anything else other than the transfer.

So in light of this I checked my own bank as I have a CC with them which I cleared a while ago.

My bank are offering MT to current account for 20 months 0% for a fee of 3%.

So that would be £2,5k with 3% fee equals £2,575 at £128.75 per month but if I paid £150 per month it would be cleared in 16 months.

Or I could take £2k which would be £2,060 and at £130 per month would be cleared in 16 months leaving me a £500 OD buffer if I need it

Better to clear completely or leave a buffer??

CreditCardJunkie

Honestly my opinion is to close the overdraft. It's too tempting. I had a very small overdraft as a student and had it always maxed out. When the interest free was up on it I closed it. I then used credit cards until I finally learned how to budget and manage my money! Rather than a overdraft buffer try and focus on building an emergency fund!

lastbigspender

CreditCardJunkie said:

Honestly my opinion is to close the overdraft. It's too tempting. I had a very small overdraft as a student and had it always maxed out. When the interest free was up on it I closed it. I then used credit cards until I finally learned how to budget and manage my money! Rather than a overdraft buffer try and focus on building an emergency fund!

Costing me £60 per month approx but in 20 months it will cost me nothing probably better long term

ryandotdee

I think the money transfer card is a no brainer in this situation, provided you have the discipline to close the overdraft immediately once paid, and then chop the card up, and never use it. 

Personally I think overdrafts are just too easy to use, and keeping one around in any size is a big risk, far better to do as CreditCardJunkie said, put money into a savings / emergency fund and rely on that if the need arises.