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Original poster

Interest on overdraft

22 replies

trampoline123 · 14/02/2023 12:49

Hi. My bank have all of a sudden started charging interest for my overdraft.

This was my main account which my wages were being paid in to, we opened up a joint account for better clarity of our finances so no money gets paid off my overdraft now - maybe that's why but I wasn't told.

The ingest charge is nearly £40 a month which I cannot afford and means it will take longer to pay off. I'm due a work bonus in June pay so was planning on paying it off then.

Do you think if I asked them to hold charging interest with my intention to pay it all off in June they would honour that?

We scrimp by each month despite working. Our child care costs are extortionate and I've cut back on everything possible just to break even each month.

OP posts:
Motheranddaughter · 14/02/2023 12:59

Is it an arranged overdraft
Generally speaking an overdraft is the most expensive way of borrowing
£40 a month seems like a lot,how much are you overdrawn
I would speak to the bank to see what your options are

Timeforabiscuit · 14/02/2023 13:04

I would weigh up the cost of getting a loan to cover the overdraft, but before you do, triple check your budget and check your income and outgoings are manageable.

It's so easy to get further into your overdraft when outgoings are high, so you might need to drastically change something or do some medium term planning if some costs like childcare are going to be for a couple of years and then ease up.

Original poster
trampoline123 · 14/02/2023 13:05

It's an arranged OD of £1800 and is nearly maxed out.

I was planning to call them today but want to be armed with as much info as possible.

Might be better to transfer to a 0% interest credit card then if they don't waive the fee?

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FrostyBits · 14/02/2023 13:06

The financial services rules on overdrafts changed a little while ago and your bank should have sent you info (paper or online) about the charges that are now in place. As pp said, an overdraft is one of the most expensive ways of borrowing money.

Speak to your bank and make sure you have an arranged overdraft as this is cheaper than an unarranged one. Their charging criteria will be stated clearly in their app if you use online banking or on their website.

I know it's easier said than done but going into overdraft every month will cost you loads so when you get your bonus try to use to get out of it and into the black.

Definitely speak to your bank other wise you're going to get further and further into debt and it can spiral really quickly. Well done for tackling it proactively.

Original poster
trampoline123 · 14/02/2023 13:07

It is annoying because I paid it all off but needed it to fall back on when my maternity pay was cut and it crept back up.

I don't use this account anymore but just have the OD sitting there.

Trust me, I've cut back so much we were minus £400 each month and now break even and some months when child care days are fewer have a small amount left over.

There's no where else I can cut back, we don't go out, I'm so strict with the food shop etc etc.

OP posts:
FrostyBits · 14/02/2023 13:08

Just seen your update re your OD being £1800. That's a huge amount on OD. A loan would be cheaper, or a 0% interest credit card but both of these will require a reasonable credit score to be competitive.

PinkFrogss · 14/02/2023 13:08

Could you get an interest free credit card, use that for spending and then use what you would have spent towards your overdraft? Then pay it all off in June

PinkFrogss · 14/02/2023 13:09

Make sure you’re claiming all you’re entitled to as well, you may be able to get more help towards childcare costs

dementedpixie · 14/02/2023 13:14

Interest rates on overdrafts are about 40% so I'd do whatever you can to pay yours off

Original poster
trampoline123 · 14/02/2023 13:15

My credit rating is good - this is my only debt.

We only use our joint account for spending so I have no need to use it now anyway, it was just at that point we needed to.

We get tax free childcare and that's all - they are both very young so no other entitlement just yet.

OP posts:
Original poster
trampoline123 · 14/02/2023 13:16

What's annoying is I remember getting a letter about it before covid hit them they decided to stop charging but I imagine as I'm paying nothing in to the account that's why they've started to.

I'll call and ask for a repayment plan if they waive the interest fees and if not will apply for a 0% balance transfer credit card.

OP posts:
DogInATent · 14/02/2023 13:16

I don't use this account anymore but just have the OD sitting there.
no money gets paid off my overdraft now
This won't help, you're just using the account as a loan account and you're not seen as making an effort to pay it off.

we opened up a joint account for better clarity of our finances
Has it really brought clarity, or just pushed the overdraft under the carpet? That might sound harsh, but think about how it looks to the bank.

Can you get an interest free overdraft on the joint account until June, pay-off the old overdraft now and absolutely make sure that the June bonus goes to pay off the joint overdraft.

Original poster
trampoline123 · 14/02/2023 13:18

Yeah I get now how it would look to them, I just thought it would be ok to pay off when I get my bonus as never got charged before. I've not been paying anything in to that account for around 6 months so thought I may have been notified.

OP posts:
DogInATent · 14/02/2023 13:24

Current account terms and conditions often have a requirement for a minimum number of regular payments in/out to maintain the perks (e.g. free arranged overdraft). When you abandoned this account for the new joint account arrangement you've probably fallen foul of this, and once a period of time elapsed you've lost the perks. Current accounts have to be used or kept with a positive balance.

Original poster
trampoline123 · 14/02/2023 13:28

100% that's what happened - stupid me!

OP posts:
Original poster
trampoline123 · 14/02/2023 13:31

Looking at 0% interest balance transfer cx cards now and it's confusing me.

Says 0% for balanace transfer fees for say 20 months but then also says 1.99% transfer fee - so assuming that's a one off costs for the privilege? Also says pay the balance over 20 months with fees and interest of £63.22...

Doesn't make sense to me. Admittedly I do not understand this kind of thing - I was never really taught financial management.

OP posts:
Keepitrealnomists · 14/02/2023 13:50

You need a credit card with a 0% money transfer option, you basically take money from that CC at 0% to pay off your OD. A balance transfer card is no good to you.

Original poster
trampoline123 · 14/02/2023 13:51

Keepitrealnomists · 14/02/2023 13:50

You need a credit card with a 0% money transfer option, you basically take money from that CC at 0% to pay off your OD. A balance transfer card is no good to you.

Thank you!

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hedgehoglurker · 14/02/2023 14:25

The £63.22 will be a one off fee.

Provided the balance is paid off within the interest-free term (20 months) AND you don't spend more on it, there will be no further fees or interest to pay.

Money Transfer is definitely the type of offer you want.

Original poster
trampoline123 · 14/02/2023 16:22

hedgehoglurker · 14/02/2023 14:25

The £63.22 will be a one off fee.

Provided the balance is paid off within the interest-free term (20 months) AND you don't spend more on it, there will be no further fees or interest to pay.

Money Transfer is definitely the type of offer you want.

Thank you v much!

OP posts:
Notsurenotquiteright · 14/02/2023 23:37

Ask your bank for a reduction plan and see if they can reduce your interest amount- banks came out with a tiered interest approach to overdrafts.
the lower the risk - you pay in frequently maybe dip in and out but always repay overdrawn amount the lower the interest amount - 19.9%
mid risk 29.9% maybe spend 15 out of 30 days in your overdraft
high risk - 39.9%
if you speak to them they might be able to lower or put it to zero.
don’t be surprised if you need to complete an income and expenditure to evidence affordability.

Original poster
trampoline123 · 15/02/2023 08:27

Notsurenotquiteright · 14/02/2023 23:37

Ask your bank for a reduction plan and see if they can reduce your interest amount- banks came out with a tiered interest approach to overdrafts.
the lower the risk - you pay in frequently maybe dip in and out but always repay overdrawn amount the lower the interest amount - 19.9%
mid risk 29.9% maybe spend 15 out of 30 days in your overdraft
high risk - 39.9%
if you speak to them they might be able to lower or put it to zero.
don’t be surprised if you need to complete an income and expenditure to evidence affordability.

Thank you, great advice.

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