Just a few years ago banks admitted they had over 2 million customers stuck permanently in their overdrafts. Living in your overdraft is never sensible and it means your money is never really yours. It can make day to day life stressful and worrying about money may become overwhelming and dominate your life. If you’re using too much of your overdraft or feel you find too much time stuck in it, then consider these tips for getting out, and staying out.
What is your Overdraft Costing?
Rather than being stressed or worried about your overdraft, look to find an effective way out. Overdrafts can be a very expensive way of borrowing money as the fees add up quickly. It may only look like a few pounds a month but this can very quickly mount up. Once you realise you’re into your overdraft start working out the extent of the problem. Find out how much the charges are and when they go out. Make sure you always remain in the limit if you have an arranged overdraft and if you have somehow ended up in an unarranged overdraft, contact the bank urgently to deal with the situation quickly.
Save and Budget your Way Out
If you are within your arranged overdraft limit then you can calmly assess the situation and find a measured way out of the debt. Unarranged overdrafts should be considered much more urgent and a priority to deal with.
If you have an arranged overdraft you can pace your way out of it in line with your income and a goal to be overdraft free. Your first step should be to take a full and comprehensive view of all your spending, bills and accounts in a single place. Budgeting begins now and you should lay everything out in front o you so you can see where money is being wasted and where you can make savings, which could go towards getting rid of that debt. Every month you can commit to paying a little more from your overdraft and this in turn will decrease your charges. You could set yourself a goal to be out of your overdraft in 6 or 12 months dependent on how much you have to pay off.
Look for a Quick Exit
For some of us, the steady approach isn’t enough to quell worries and a quicker solution is necessary. A quick solution is also necessary if you’re in an unarranged overdraft, so consider these quick solutions:
If you have the cash or a means to get it, then ensure you transfer it in and clear the overdraft before any fees are due. You should always try and have a little spare cash in the event of an unexpected situation which leads to an unarranged overdraft, so you can be ready to cover the expense before there are any charges.
Look at 0% Interest Accounts and Credit Cards
If you are eligible for a 0% credit card then it’s a good idea to consider moving your overdraft balance over, to remove your overdraft from your bank account and begin paying off the debt at a lower rate. Make sure you pay it all off before the 0% interest deal expires or you will begin to incur charges again.
As part of your budget plan, you should have looked at prioritising your debt. Overdraft payments should be high up the list after your priority bills.
Opt for No Overdraft
An overdraft isn’t a great idea for everyone and if the temptation to utilise it all the time is too high or you’re relieved to be finally out of your overdraft, consider a card with no overdraft facility. Many of the leading banks provide basic accounts with no overdraft facility, ensuring there is no risk at all of ending up in the overdraft trap ever again.