MoneySavingExpert.com Feature by Martin Lewis, MoneySavingExpert Overdrafts
Overdrafts are a debt like any other, if you don’t manage it, it will spiral out of control. While there are methods to cut the cost, they’re often far less talked about than the common techniques for cutting credit card bills – but are just as important.
In a nutshell
your aim should be to cut the cost and repay what you owe. Here’s my tips on how…
Get paid £100 to take a free overdraft. There are two big players who off er decent deals for those with overdrafts who switch account. Though you’ll need to pass their credit score.
Move to
www.fi rstdirect.com, which is the no. 1 rated bank for customer service (92% of my web users rated it ‘great’) and you get an ongoing £250 overdraft. Crucially it also gives you £100 sign up bonus, which you should put straight towards your debt. To get it you’ll need to pay in your salary or income, which must be at least £1,000 a month. Alternatively for a potentially larger 0% overdraft there’s the
www.nationwide.co.uk FlexDirect account. Yet it only gives you this overdraft for the fi rst year, so ensure you use that time to clear the debt or afterwards it’s 50p a day.
Shift your overdraft to a 31 month 0% card. While you may have heard of credit card debt shifting deals called balance transfers, a few cards also off er a ‘money transfer’ where it simply pays cash into your bank account, so you can then pay off your overdraft, meaning you then owe it instead. This is a good option if you’ve a bigger overdraft and will need more than a year to repay it. My top pick card right now is
www.mbna.co.uk, which lets accepted customers do it at 0% for 31 months for a one-off 4% fee (it’s just 2.88%
84 for normal balance transfers). However, it’s
credit score dependent, so use the
www.mse. me/eligibility tool which will show you which money transfer cards you’ve the best chance of getting.
If you are doing a money transfer do follow these golden rules: 1. Don’t assume all cards do this, most charge a fortune.
2. Always repay the monthly minimum or you’ll lose the 0% deal.
3. Plan to clear by the end of the 0% period or it jumps to the full rate - with MBNA that’s 22.9% rep APR.
4.
If you’re unsure of what you’re doing use the step-by-step help in
www.mse.me/ moneytransfers.
Manage your way back into credit. Cutting the cost of your overdraft isn’t the end game, you should aim to always be in credit (or at least always within your overdraft when there’s no cost). To help do ask companies you pay to shift direct debits to near the end of your working month. If paid on the 25th, aim for the 20th. This artifi cially boosts your balance so you’re in the red less - but don’t spend the cash. Moving bill dates cuts fees, but won’t tackle the overdraft. So sit down and do a budget to fi nd out where you can cut back.
Organise incoming cash and move it into bill pots at the start of the month so you’re not tempted to spend unnecessarily, it’s called piggybanking. Use this technique to make payments - eg, £100 a month - to your overdraft, treating it like any other bill. Use my free automated budget planner to help at
www.budgetbrain.com.
To advertise in thewire t. 07720 429 613 e.
the.wire@btinternet.com
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