I’m in a far better financial situation that I was a few years ago and I’ve decided to start trying to pay off my overdraft each month. Is there an easier way to do it? Halifax seem to try to make it as massively difficult as they can. I tried to ask them if I could set up a regular amount to come out of my wage every month to reduce it and they said I had to go through the rigmerole of phoning up and being on hold for ages every month.

Is your overdraft on a different account to where your wages go? Just use your online banking to set up a regular payment between the accounts (even if the accounts are with different banks). Some will even allow you to sweep up any surplus cash just before you get paid, and stick it in a savings account…i.e. you set it to move everything bar £100 into a savings account on the last sunday of each month.#

When I was young my overdraft grew to the size of my paycheck, had to sell my bike (for much less than I realised it was worth) to pay it off 🙁

Or change banks. With First Direct phone banking I rarely rake more than 1 minute to get through on the phone.

As for overdrafts, I rarely use it but for about £15 per year I have a £1500 overdraft. So if I needed to go into the red for a few days I’d just pay a few pence interest.

Near the top of most customer satisfaction surveys as well.

We haven’t gone out for a meal for two years or had a holiday or really bought new clothes. All the money is going on paying off the interest-free credit card loan for the new kitchen (grrrr!) and paying off the mortgage, as well as bike parts of course – we do have our priorities right.

I’ve cleared 2 credit cards and now pretty much a loan, the overdraft isn’t a massive issue, just want to start hitting it. Was thinking of a certain amount a month, maybe spookys idea will work better. I’ll have a look into my online banking now.

Cheers.

What sort of account is your overdraft on? I have a Halifax/bank of Scotland ‘ultimate’ current account with a £3k overdraft that’s there if I ever needed it. If I used it then wanted to pay it off then it would simply be a case of paying x amount into the account to put it back in the black. Costs £10 month including travel insurance etc but if the overdraft was used there’s a daily charge I think plus the monthly fee goes up I believe.

Take out a small loan with zopa and pay it back over a short period, 18 months? Zopa let you over pay without penalty too

I wouldn’t take a loan, you clear the OD but then the fixed payments may result in dipping back in to clear the loan each month. At least with a regular payment you can jump in and lower the payment if you have an expensive month.

assuming it is a different account to the one your wages/salary can’t you just set up a standing order? If it is the account you’re paying your wages/salary into then assuming you’re no longer spending more than you earn then just let it be and the overdraft will sort itself out over time.

Alternatively get an interest free credit card. Some allow you to transfer cash as well as pay off another card’s credit and you can set up a DD to pay an amount off each month so you clear it within the interest free period. There is a 3 – 5% charge so not strictly interest free, but still very cheap money.

johnny – what’s the actual problem? Not sure if I understand from your post.

same account – spend less every month and the OD reduce. Set your own target limit target if it helps – £1,200 this month, £1,100 next month…

different account – set up standing order as above, or just make a payment with internet banking, or even cash/card at a branch?

If you have your current account with Halifax and you can’t quickly and easily make individual payments or set up a standing order, put your money somewhere else!

If your credit score will withstand it, open a credit card with an interest free period that also allows cash transfers. Calculate the payment required to pay off the total amount per month over the life of the interest free period, typically 12-24 months, and set up a direct debit from your overdrawn account. Some credit cards only charge one or two percent of the total transfer fee. Do NOT use the credit card to spend. That way the loan is effectively interest free bar the cost of the initial transfer. Way cheaper than even an agreed overdraft.

You’ll need discipline, but if you can pay it all off within the interest free period it will save you a considerable amount.

http://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards#rule6

Another question. Are you currently saving anywhere? If so, as a general rule, savings don’t earn as much as debt costs, so suspend your savings payments if you can, until the debt is cleared.

globalti – Member
We haven’t gone out for a meal for two years or had a holiday or really bought new clothes. All the money is going on paying off the interest-free credit card loan for the new kitchen (grrrr!) and paying off the mortgage, as well as bike parts of course – we do have our priorities right

Slightly ot globalti and by no means a criticism, I’m just curious; your post implies that you don’t have a lot of fun around the demands of paying off you debts quickly – is that the case? The thing I’m curious about is that – for me anyway – would a more balanced approach not mean you could enjoy life a little more, without waiting until you are pensionable age or similar before you plan your next meal out? I mean, sometime we have to accept than mortgages just take time to get paid off you know?

Just interested in your thought process/ plan I guess, as personally I could be stuck indoors for 15 years paying off a mortgage without some kind of diversion.

It’s not the money that’s the problem, it’s how inconvenient they make it, even going into branch all they do it point to a phone on the wall. I was hoping there was a way of not having to faf about making a 1-2 hours phone call every month to do it. I think I’ll do what people have said an put the money in another account and pay it off over time. Just thoughy in this day and age I might have been able to set up a payment plan with my bank and forget about it.

If it’s your usual current account then just pay in more than you pay out. The. At intervals reduce the size of your overdraft. That’s what we have done this year and have dropped from a massive overdraft to barely anything. The intention is to get rid of it all together.

Hard to be certain without knowing which bank and which account, but you almost certainly can do it easily: there’s no way it should take an hour plus on the phone.

I’d go into the branch and speak to customer services rather than at the counter. Tell them what you want to do and ask them to explain how.

Make it clear you’ll be switching banks of they can’t sort it! After all they have to do all the legwork for a current account switch these days.

I’d not accept that level of service from my bank. Btwthe ultimate reward account mentioned above is a good shout, if you need the phone cover, AA/RAC and travel insurance. We’ve had good service from them.

johnny – as a comparison, from clicking on the natwest online link to confirmation of a payment, it’s about a minute tops.

– click
– 2 stage login
– click on payments and transfers
– select which account it’s coming from, which one it’s going to, amount, date if not today
– check screen
– confirm.

If it’s my natwest savings to current or the other way round, there’s a quick transfer box on the side. More like 10 seconds for that.

If it’s a payee I’ve not paid to before, there’s an extra security thing with a card reader and key code confirmation.

It should be this easy, or at least not far off. If it’s not, change accounts. I’ve had a couple of periods where I’ve let things get out of control and having a tool like this that makes it so easy to manage your money is a huge help. Payday – login, pay credit card, bit into savings, bit into joint account, depending on what’s going on. Done. Feels good.

Is there any real problems with using your overdraft long term (future finance, credit rating) or is this purely to avoid charges and/or to be debt free?
I still have money in an interest free overdraft from a student account, I could pay it all off but don’t want to take money from savings for house deposit

Slightly ot globalti and by no means a criticism, I’m just curious; your post implies that you don’t have a lot of fun around the demands of paying off you debts quickly – is that the case? The thing I’m curious about is that – for me anyway – would a more balanced approach not mean you could enjoy life a little more, without waiting until you are pensionable age or similar before you plan your next meal out? I mean, sometime we have to accept than mortgages just take time to get paid off you know?

Just interested in your thought process/ plan I guess, as personally I could be stuck indoors for 15 years paying off a mortgage without some kind of diversion.

When Mrs Gti was working we had adequate funds and could go out several times a month as well as go skiing and take a summer holiday. She had to give up work when she suffered an injury so now we have to manage on my salary, which is good, but we both have a wish to get the mortgage paid off as soon as possible because I’ve only 6 years to retirement (or less possibly if I go early). Thanks to low interest rates we are overpaying heavily at the moment. On top of that refurbishments to the house, necessary if we are to stand any chance of selling when we do retire, have cost around £100,000 in the last 12 years. The most recent was a complete gut and rebuild of the kitchen, with the over-spend beyond what we had saved put onto an interest-free card, which has to be paid off by end December. Apart from that and a £75,000 mortgage we have no other debts. We want to be able to move to western Scotland in the next few years, buy a house facing west over a loch and have no debts.

OP, This might sound daft, but why don’t you just not use the OD facility a bit less every month, then reduce it down to a level you’re comfortable with when you’ve cleared a chunk of it?

I used to be a proper nightmare with money, I’d literally be too scared to check my balance so would walk up to a cash machine and try and get £50 out, if it worked then i’d go out, if not then i’d try £20, £10 etc 😳

To this day I still have a weird fear about checking my balance at a cash point, but check the banking app on my phone a few times a day. Having that instant access in my pocket has transformed my money management.

jonnytheleyther – Member

It’s not the money that’s the problem, it’s how inconvenient they make it, even going into branch all they do it point to a phone on the wall. I was hoping there was a way of not having to faf about making a 1-2 hours phone call every month to do it. I think I’ll do what people have said an put the money in another account and pay it off over time. Just thoughy in this day and age I might have been able to set up a payment plan with my bank and forget about it.

My Wife closed a Halifax account because it was so difficult to actually do anything with her money. It was like they made it intentionally hard for her to withdraw it, in the hope that she wouldn’t bother.
This was a savings account, rather that a current account but there were no access restrictions on it, apart from it being a pain in the ass.

Thanks globalti – makes a lot of sense. I have 23 years until current retirement age and 17.5 until the mortgage ends, hence my question, but I think in your circumstances with a 5-6 year plan of moving to an idyllic location debt-free I’d be doing the same!

I don’t really understand what the OP is getting at, surely to pay off an overdraft you just don’t spend all the money that gets paid into the account?

If same account, as your normal account then try very hard to.resurgent so there is excess each month, that will bring you out the overdraft. If another account, setup a monthly payment…online is ‘easier’ but phone might be it…few minutes pain on hold to allow you to get on top of things sounds like a plan.

I don’t really understand what the OP is getting at, surely to pay off an overdraft you just don’t spend all the money that gets paid into the account?

That.

An overdraft is a negative balance on an account. The only scenario I can see here is that the OP has built thus up on one account and is now using another for salary/wages. That being the case he either needs to set up a DD from the second account to the first or register for online banking with the second and make ad hoc payments into the first as he can afford them

dont do overdrafts – mugs game -just stop spending and pay it off quick
I use nationwide online ap, all the accounts are there and transfers between them take 2 seconds. Im sure all the rest of the banks have the same cant see the problem.

Still don’t understand what the OP wants the bank to actually do.

Still don’t understand what the OP wants the bank to actually do.

Yeah me neither.
You pay off your overdraft by not spending as much in your current account so that your overdrawnness gets less. You don’t have to do anythign, its a case of not doing spending.
If the overdraft is a separate account then usign online banking in every bank account I have and have had, it is easy to set up a monthly standing order fom one bank account to another.

Unless the OD is in an account he’s not otherwise using

Yes but

it is easy to set up a monthly standing order fom one bank account to another.

Even in different bank…

OP I am also not sure why it’s so hard, if you can keep track of your finances the best way is to pay your salary into the account with the overdraft as per the suggestions above. Overdraft interest is calculated daily so every £1 into that account helps even if the money is only there a week or two. From a commercial point of view of the bank is confident you can repay then they’d rather you keep the overdraft longer and pay their interest charges, hence they don’t have any incentive to encourage you to repay.

It’s probably just a Halifax thing. I’ve got a secondary account with the Halifax which I only really use for paying birthday money into. The account doesn’t pay any interest nowadays, but at least I can see a bit of cash building up. However, I once wanted to make a bank transfer from the Halifax account, and they made it so difficult. I didn’t bother in the end…

Is there any real problems with using your overdraft long term (future finance, credit rating) or is this purely to avoid charges and/or to be debt free?

Both for me, I want to pay as little as possible to a bank and I want to be free of all debt.

If you want a “payment plan” then turn the OD into a loan and set up a DD or SO. Given you inability to explain the issue on here I very much expect we’re not getting the whole story. I’ve used the Halifax home banking system years and I’m never in a branch other than collecting currency.

I used to work in a bank so I’ll try to have a guess.

Typically customers who’ve had an overdraft for a long time, years, have made a mental leap – an overdraft is no longer a safety net or whatever, it’s ‘their’ money which they pay interest on.

When customers decide to use it less, they sometimes ask the bank to reduce their limit slowly, it removes some of the burden of self control from them – they may start with a £2000 facility and ask to reduce the limit by £100 each month, so in a months time their facility is only £1900 – the thinking being that if they can’t spend it, they won’t spend it – whereas if they have got the limit they will spent it.

there are 2 reasons why most banks won’t do this:

1) should the customer default on their account, they could use this agreement to prove to a judge in County Court that their overdraft was in-fact an in all-but-name personal loan, and without the correct contract for a personal loan it would become unenforceable – which is as good as saying it doesn’t exist. But this is unlikely.

2) more importantly, it’s not in the Bank’s interest to do so – Banks love overdrafts because lots of people have them, they usually start as student overdrafts and people carry them their whole life – they charge much higher interest on them that they do loans, people just keep paying month after month after month, customers generally just file this as a ‘bill’ and forget about it, crazy, and unlike a loan overdrafts are ‘payable on demand’ as in the bank can pull them whenever they like – so if a customer starts to have problems financially, they’ll pull it, it doesn’t even matter if they pull it and it leaves you in an unauthorised overdraft position – when the wolf is at the door, the bank will do you immediately to get paid first.

If the OP is worried that they might not have the will power to reduce the amount they go OD every month, don’t worry, you’re far from alone. The easiest way to do it is to move banks, transfer the amount you want to pay off your OD by each month into your old account until it’s clear. The downside is that you can still withdraw money! Also the bank may pull the facility if you stop having your wages paid in.

The cheapest and most prudent way to do it if you can’t pay it all at once is to get a loan for the value of the OD, the interest rate will be lower, choose a repayment term which gives you a payment you are comfortable with. Pay the value into your account and call them to withdraw the facility – the danger is that if a ‘rainy day’ comes you HAVE to pay the loan whatever your you’ll get a little dirty mark on your credit file.

Yup, and “most prudent” also depends on the loans on offer, the size of the overdraft, how good you’ll be if you’ve got a surplus, and whether they’ll charge you for early repayments.

I’ve heard of people who’ve had a £2K overdraft, wanted to clear it, been sold a £5K loan, “because the interest is so much less over a certain loan value” paid off the overdraft, balked at the early repayment charges for the excess, frittered it away instead and ended up overdrawn again, with loan payments to boot.

Easy to do if you’re not being careful, the banks know it, they see it all the time, but it makes them money, and a lot of the time, that’s more important than making sure people are making the right choice for them. “Most prudent” for a lot of people is to be honest with yourself and reduce the exposure for coming unstuck.

I got exactly this service carried out by Natwest, but without me asking for it.

I had lived in my OD for ages, with me being salaried monthly paid and my wife temping weekly paid the split of our bills was unusual. Natwest phoned me up, asked questions that didn’t really apply to me… “how much do you spend on food a month?”…”Nothing, wife pays for food I pay for rent and bills”, “ok, how much do you pay for travel a month” “again nothing, wife pays that weekly”. Aaaanyway, long and short of it was that they wanted me to reduce my overdraft as presumably they didnt think I was a good credit risk. They told me to choose how many months I wanted to use reduce it from 2500 to zero and I said 2. They said that their questionnaire indicated that wasnt possible, I told them that their questionaiire was stupid and said to do it over 2 months which they did.

So, to cut a long story short, make the bank think you cant afford your overdraft and they will give you whatever you ask for in terms of clearing it

OK this is getting boring now so I am going to say what I’ve been thinking from the beginning and I am sure others have too:
I’m sorry but the post above and the OP’s post make me think some people are either mad or making things up. Steve-g I had exactly this where the bank decided to withdraw my overdraft. BUT there is not and never was a barrier of any kind to me paying it off before. Just dump the money you owe in the offending overdraft account and bobs yer uncle.
An overdraft is a flexible credit facility, so you do not need any kind of procedure to pay it off. You either withdraw too much money and you go overdrawn, or you just spend less. i accept that it may be in a different account, even in a different bankl from the one you use now, in which case just do the things advised on here to easily pay it off.

The weird waffle around the bank making it difficult for you to pay it off just makes me think the OP and steve-g above have never had an overdraft, otherwise they would know exactly what an overdraft is. (I just cannot believe that they are both so thick as to not understand how it works otherwise.)

If they counter staff are pointing you to a phone on the wall (or a clever ATM that takes cheques etc) its probably because you have an online banking and telephone banking only account, that pays a better rate or avoids a monthly charge on the basis that you are not permitted to use the counter services.

I had one of these, can’t remember if it was Halifax, or Nationwide, sure it was one of the building societies, queued for ages to pay in a cheque, and when I gave them my details they said I couldn’t use the counter service and sent me over to queue at the cheque eating ATM where I had to put in in an envelope and post it in.