Do you worry you will always be stuck in your overdraft?
You aren’t alone. Overdrafts can be the hardest sort of debt to pay off. Even authorised overdrafts aren’t cheap, once you stop being a student.
So what can you do that will work?
Contents
Very hard to escape from
The hamster on this wheel is enjoying going round and round and never getting anywhere. For many people, their overdraft feels like this… but without the fun.
You get paid and your overdraft drops nicely – perhaps you are back into the black for a few days.
But then the bills start being paid and your account sinks deeper and deeper into the red. And the bank takes its monthly charges out, making things worse.
Very temporary overdrafts are great!
If you don’t use your overdraft regularly, an overdraft can be very convenient. A delay of a couple of days in being paid, a big bill just before you get paid… in this situations an overdraft saves a lot of trouble and as you are only in it for a few days, it doesn’t cost much.
This is what overdrafts were originally designed for. But over the years they have changed into permanent debt for many people.
“It didn’t feel like a real debt”
Many people don’t even think of their overdraft as a real debt until they go over their limit
This may be because you don’t have to pay any money to it each month like you do a loan or a credit card. So it doesn’t feel like money you have borrowed that has to be repaid.
Using your overdraft can easily become a habit, not something you worry about at all until you get close to the limit. And then you may find your bank increases your limit!
Most students end their uni courses with a large overdraft. That never felt like a real debt because it was free!
But this is a real debt. And here is what’s bad about living in your overdraft:
- the charges are often very high;
- it’s depressing. Your work and life become one endless round of payments and income that is never quite enough;
- other lenders will think of your overdraft as being “real debt” if you apply for a mortgage or other credit;
- if you are routinely using a lot of your overdraft every month, you don’t have it there as a back up for an unusual situation.
Many people are now being charged more for overdrafts
In 2019, the FCA announced big changes to overdraft pricing, making them much simpler. The FCA hoped this would bring the charges down.
But when the new fees came in 2020, there were some winners but a lot of big losers:
- people who used an unauthorised overdraft have seen the charges reduce as banks aren’t allowed to charge more for them now;
- flat fee charges such as £10 a month or £3 a day are now banned, so people who use their overdraft very little have normally done well
- but 8 million people who used their overdraft regularly are the losers, seeing their interest charges go up much more than the gains from losing the flat fees.
Why is this so hard to pay off?
A loan is simple – you pay so much per month and the amount owed keeps falling.
Credit cards are a bit harder as you are always tempted to use the card again. But you can leave it at home, put it in the freezer in a block of water, give it to your partner to look after or even cut it up … if you are determined you can keep a credit card balance going down each month.
But you can’t easily stop using your current account. And there isn’t a way of automating reducing your overdraft by setting up a regular payment.
With all the complicated transactions on your current account – pay going in once a month, possibly variable amounts if you don’t work fixed hours, tax credits going in at different times, rent/mortgage and bills all going out on different days by direct debits etc – it’s not always simple to see what is happening either.
So it’s psychologically much harder to reduce or clear an overdraft if you are still using the account.
Five ways to get rid of your overdraft
1) Aim to reduce it every month
Many people try this first, aiming to sort out their overdraft by reducing it by a bit each month. These ideas may help:
- get a good budget which you check before you spend money, not after.
- making sure your partner is completely onside. You both need to be very determined to make this work if you have a joint account.
- have a general financial review. This may remove some unwanted direct debits and standing orders you are currently paying.
But for many people, this “chipping away at it” approach simply doesn’t work for the months and years it would be needed for.
2) Clear it with a loan or balance transfer
This is “debt shuffling” not debt repaying. But as overdrafts are so tricky to pay off, you may find these simpler.
If your credit rating is ok, look at getting a cheap loan to pay off the old overdraft – that could save a lot in bank charges. Simple monthly installments – a good move if you are sure you can afford them.
Most 0% balance transfer cards will only let you clear a credit card balance, not move the money to a bank account. But there are a few money transfer offers around if you have a great credit score – although the length of the 0% is usually 18 months or less:
- if you can clear all or most of the card within that time, then this is the best possible way to get rid of your overdraft;
- if you don’t, then you are then paying the high credit card interest rate.
The biggest danger with the loan or a money transfer is that you just start dipping into the overdraft again. You could reduce the limit on this to try to stop this happening.
3) Switch to a new bank account
This is often the best way to solve an overdraft problem.
Sometimes you can transfer your overdraft to a new account where it will be cheaper, especially if your credit rating is good and the overdraft isn’t large. See MSE’s guide to the best accounts for people with overdrafts.
But if you can’t do this it’s still worth getting a new account – one where you intend to be in the black for all except a few days each year.
However bad your credit rating is, you can always open a “basic bank account”. Basic bank accounts are actually very good, with no charges. You get a proper debit card and mobile banking
So switch to using the new account for all your banking, Banks now make it easy to switch to them – it’s quicker and simpler than you may think. Have a look at the new challenger banks – Starling and Monzo have great apps that make it easier for you to budget well.
Then you can repay the overdraft in your old account a bit at a time. Make sure you pay in at least as much as the bank charges and it will start dropping every month. Or you could then use a loan or a balance transfer to deal with the old overdraft for good.
4) Tackle your other debts first
If you have tried chipping away at it and got nowhere and you don’t want to change bank accounts, you could decide to live with the high overdraft charges at the moment and get on with dealing with your other debts.
If you can pay off a credit card or a loan, your general situation will improve and you are more likely to succeed in having another go at your overdraft. It needs to go at some point!
5) Get a refund if your bank set your limit too high
Sometimes the reason you can’t get out of the overdraft is that it is simply too large. You may have been given a reasonable amount at the start, but then it went up and up.
Banks are supposed to only increase your overdraft limit if you will be able to afford the higher charges. But if your bank could see you were in your overdraft for most or all of the month, or there was a lot of gambling showing on your statements, or your credit record was poor, they should have known the higher limit would be too large for you.
Read Can you get refunds from overdrafts? which has details on this with a template you can use to complain. If you win, you will get a refund of some of the charges you have paid.
Is your overdraft just part of a bigger money problem?
If your financial situation is so bad that you can’t see how you are going to reduce any of your debts, you need to look at the bigger problem.
This usually means getting a new bank account and then the overdraft on the old one becomes another debt in your Debt Management Plan or gets included in the insolvency option you choose.
Talk to StepChange about how a DMP could work for you. They will explain if you have any better options.
Card & catalogue affordability complaints
“Snowballing” – the fast way to clear your debts
How to use a credit builder card
Stephen says
i currently have a £1000 overdraft with santander that is at its limit, also it costs £1 a day when im in it so roughly £30 a month.
Ive actually opened a new account with no overdraft and transferred everything to that account, i currently pay in enough to cover the overdraft costs but it obviously doesnt reduce the overdraft.
Is there anyway of closing the account and then paying it off? I could probably afford around 30-40 a month
thanks for your advice
Sara (Debt Camel) says
Hi Stephen,
if you can stretch to 40-50 a month then the balance will start falling.
If you really can’t, the only way to get the charges stopped is probably to go into some form of debt management. I suggest you talk to Stepchange about this, see https://www.stepchange.org/Howwecanhelpyou/DMPdebtmanagementplan.aspx.
Rochi says
Hi Sara, I wanted some advice on my overdraft debt with lloyds bank, I don’t know how it ended up at £2530 but they allowed me to increase it in £20 intervals every week or whenever I wanted. Even after I told them I stopped working. I have just switched banks due to the wonga data breach and the new bank would not let me take the overdraft to new account which is completely understandable but I really would like to pay it back but the monthly charges are literally getting unaffordable and now I have no money going into that account and want to pay it off but have no chance with monthly interest at £46 a month, do you have any advice on what I can do and if you think lloyds will freeze interest and let me pay it off in monthly payments. Any advice is really appreciated x
Sara (Debt Camel) says
How much do you think you could pay towards it? Apart from the payday loans you have started complaints about, how large are your other debts?
Rochi says
Hi Sara this overdraft is my only large debt, all my other payday loans are repaid and I only have 2 credit cards which are mangable with very low credit limits. I can probably afford £50 a month.
Sara (Debt Camel) says
OK, then I suggest you talk to LLoyds and say you feel they have raised your overdraft to an unaffordable level and you would like them to offer a repayment plan for you to clear it as you have now stopped using the account.
Roch says
Just a quick update, I have spoken to Lloyds and they really helped me. The lady I spoke to did an income and expenditure over the phone and assessed that I cannot afford the charges and interest and she can see that I am struggling as my income is very low she refunded all the interest and charges for last two months and advised me that I can contact stepchange and citizens advice and to switch banks and cancel all direct debits (which I have already done)
I agreed to refer the debt over to collections as this is the only way to freeze interest and charges for the future. I am now waiting for the collections team to call me to set up the payment plan to pay back in instalments, I feel like a weight has been lifted
Thanks so much for your advice Sara x
jo says
Hello,
Has anyone ever filed a complaint about unauthorised overdrafts with regards to this was not in the contract of the bank account and also that they were in financial difficulty whilst using this negative cycle of the unauthorised overdraft and the bank charges that followed. I became so down with the HSBC £600 unauthorised overdraft I ended up having to pay them back monthly with a plan. I now have a default on my account and previously I found it impossible to stop the charges from small amounts like £20-30 over drawn, then charges then put me into £100 overdrawn this popped me into financial difficulty. I needed to put food on the table and get to work so I just gave in the manipulative cycle. Any advice will be received gratefully.
Kind Regards
Sara (Debt Camel) says
Hi Jo, there is a good page here http://www.moneysavingexpert.com/reclaim/bank-charges on trying to reclaim overdraft charges.
Acee says
Hi Jo I did with Halifax about 3 years ago they initially rejected my complaint and I forgot all about it didn’t realise back then I could send to Ombudsman however out of the blue a few weeks later they sent me a letter saying they now agreed with my complaint and wiped £1400 from £3400 balance. I got the letter template online but can’t remember where. I then told my parents and they did the same and got £200 back so it’s worth doing.
Acee says
Sara I claimed a few years ago from Halifax on their overdraft fees I had a monthly salary of £1000 and an overdraft of £3400 which I’ve just started paying back through stepchange. They agreed with my claim a few years ago and said they would wipe £1400 from my overdraft and immediately cap my overdraft balance £2000 however they didn’t stick to this and I was able to to extend my overdraft to £3400 when I was desperate a few months later would I have a chance of claiming again as they allowed me to get back in debt to £3400 because they didn’t cap it at £2000 as promised?
Sara (Debt Camel) says
This sounds like a good reason to complain! These overdraft limit cases aren’t easy but the fact they knew you were in trouble before and still raised your limit is a strong one.
Acee says
Thanks Sara I’ll give it a go currently paying them £245 a month back via DMP so maybe they will knock a bit off I’ll let you know how it goes.
Dave says
Well… with my payday loan refund payout yesterday I decided to contact my bank and clear/cancel/remove my overdraft.
Received confirmation, all sorted.
This morning get an email offering me an overdraft.
Is it any wonder people end up in this mess?!
Sara (Debt Camel) says
Grrrr
Dave says
My thoughts exactly.
Needless to say, I didn’t bother accepting.
Em says
Hi,
My husband has a Halifax overdraft and have been in it for years. It’s £1000. Now they’re charging a daily rate AND monthly charge. We can’t afford to clear it and the charges are worse than a credit card at £1.70 a day plus the £30 a month. They started this in November. What can we do? This is going to mean being in debt for years.
Thank you.
Sara (Debt Camel) says
Halifax charge 1p per £7 per day. If your husband has an overdraft of exactly £1000, this would be £1.42 a day. To charge you £1.70 a day his overdraft has to be about £1200 on average – is it?
The £30 a month charge – there shouldn’t be one (unless this is an Ultimate Reward Account, but that charges a lot less than £30 so I don’t think it’s that). I have seen a comment on another forum (it’s a closed group so I can’t link to it) saying that the monthly charge is just for this month then it ends and that they will cancel it if you phone up and complaint. I don’t know if that is accurate, could you phone up (or email them?) and ask?
But even if the monthly charge goes, this is still very expensive.
“This is going to mean being in debt for years.” well yes, but to point out the obvious your husband has already been in debt for years and hasn’t cleared it…
One thing your husband could do is phone them up and ask if they can give him a reasonably priced loan to let him clear the overdraft. If they won’t, this is probably because he has too much debt. I suggest talking to a debt adviser about his options – living in an overdraft all the time has just got a lot more expensive and this may have to force a rethink of your situation.
Jo says
Phone up a non profit debt organisation. I think it goes as they freeze it stop the interest and you agree a monthly amount. Get a new bank account first and then do it as a safeguard x
Anon says
Have you had any experience with banks leaving late payment markers on a credit file for bouncing a direct debit or standing order on a current account? I had this happen to me a number of months ago where a direct debit was taken a few days early and bounced due to insufficient funds. Apparently, only HSBC and First Direct report this information to the credit reference agencies.
I did lodge an appeal with the Financial Ombudsman, but they found in favour of the banks as it was listed in their terms and conditions that they could do this. However, I still strongly believe that this is misleading and false information to have this recorded as a “missed payment” against a current account record on a credit file.
Sara (Debt Camel) says
I haven’t come across this.
Hayley byrne says
I had an overdraft with the nationwide on an account I opened 12 years ago, I’ve been paying back monthly under a dmp ( one I’m doing myself) they cant provide the original credit agreement, is the debt still enforceable.
Sara (Debt Camel) says
National Debtline are good people to talk to about this: https://www.nationaldebtline.org/
Liam McLoughlin says
Hi Sara,
I have a Overdraft on my Account that i never use or need. I am trying to improve my credit score.
Should i keep this on my Account or remove it to improve my score.
Kind Regards,
Liam
Sara (Debt Camel) says
Is it large?
Michael says
When does an overdraft debt become statute barred? I have a £3k overdraft default from November 2012, last used by myself in July 2012, and the overdraft facility on the account was withdrawn in August 2012.
A DCA has recently been in contact in regards to paying this back, albeit at a discount
Sara (Debt Camel) says
No simple answer. I suggest you talk to National Debtline about what they think – including the circumstances around them withdrawing the overdraft.
Alice says
Hi, any advise on the following? A friend has an outstanding/defaulted £5000 overdraft with Halifax. He has not made any Payments for nearly 4 years (also £5000 loan and £1000 credit card with them loan defaulted but credit card maxed but min payments being made) a few years into being £5k overdrawn continuously they changed the overdraft terms to £90 a month. The statements are awful…bounced direct debits every month and charges every month for those. They could see from his account there were payday loans and income was not consistent as self employed but still gave him the £5k loan. Seeing as he was already at the £5k overdraft when they changed the terms he could do nothing but accept it. Court papers arrived today for the overdraft…worth making an arrangement to pay through courts and challenging the several £1000s worth of fees and charges ? I am thinking step change and possibly bankrupt as there are more debts. Thanks!
Sara (Debt Camel) says
I think your friend needs to be realistic. There is no point in spending ages and having a lot of stress trying to challenge charges and fees if his other debts are so large that bankruptcy is his best option. Perhaps he could come here and give a brief summary of all of his debts? And his current ability to pay them?
Alice says
Thank you I will direct him this way :-)
Jade says
Dear Sara,
Firstly, I want to thank you for all the advice on this website – I am so grateful for it. I have a very long way to go to clear my debts, but at least I have made a start.
I wondered if I could pick your brain about an overdraft I have with Nationwide? In October 2017, I wrote to all my creditors (banks and payday loan companies), requesting reduced payments. They registered defaults on my credit file and I have entered into payment arrangements with them all (I’ve also now sent affordability complaints to the payday loan companies).
In April 2018, I was stuck for money. I applied for an overdraft on my Nationwide current account and they gave it to me – £1,600. I was surprised, but relieved! 6 months later, they asked for it back – I couldn’t pay it, of course, so they registered it on my file and I am on a repayment plan with them, where it automatically gets reduced by £10 a month.
They’ve been very helpful when I arranged this with them, and because it’s the account my wages go into, I don’t want to mess anything up or have the account closed.
But I’m wondering if there’s anything I can or should do about this. My credit rating must have been shocking when I applied for it (I’d defaulted on a bank overdraft, bank loan, 2 credit cards, plus payday loans) so I don’t think they should have given it to me the first place. Do I have a case for irresponsible lending, or am I likely to screw up my repayment plan by pursuing that?
Thank you!
Sara (Debt Camel) says
What is this arrangement with Nationwide – are they charging you fees and interest?
Jade says
Hi Sara,
I got a letter from them saying they were removing my overdraft – so I called them to discuss my options as I couldn’t pay the £1,600 back. Now, the overdraft facility is still in place and but they reduce it automatically £10 a month and I pay approximately £17 interest per month. If I go a penny over the limit, I have to call them as it makes the arrangement fail and the removes the agreed overdraft entirely.
I think this seems ok and manageable (do you agree?) but I suppose I just wonder how they could have lent me in the first place since my circumstances were no different 6 months later when they decided to remove it.
Sara (Debt Camel) says
I think you could ask them to freeze interest and in return say you will be happy to have the limit reduce by £25 a month? You could say you feel they should have realised the limit was unaffordable if they had checked your credit record before offering it.
These are much harder complaints to win then payday loan affordability complaints.
Jade says
That’s really helpful, thank you. I’ll do that!
Paul says
I had 1900 overdraft with halifax(my wages were 1100)..and for years i paid daily charges.then after struggling i had a new £160 agreement with them per month to lower my overdraft and they froze charges. I got it down to below 800 but got into financial difficulties and rang them. They were nice on phone and said they would gave me 30 days breathing space when i explained i was going into a dmp with stepchange. Then just yesterday evening they emailed me saying my new o/d limit was £0 . Now my wages are in and iv £400 left which is not enough to live on. They are killing me
Sara (Debt Camel) says
Did StepChange not suggest you need to get a new bank account?
Paul says
Yeah i set up a new bank account but i could not prevent my wages going in halifax as it takes time and you have to gave notice to change over where the wages go. The email came at 2330 last night from the bank which is literally no warning at all and a real sucker punch!
After a reassuring phonecall with my bank midweek ensuring they would accept my dmp with stepchange as long as my payments were more affordable and that they would do everything they could for me in terms of helping me, the last thing i could have predicted was them wiping my overdraft!!!
So i intend to ring them today and tell them how unhappy i am with this and take this to ombudsman.
I accept its my fault im in this mess but them gaving me £1900 o/d on £1100 wages was irrespobsible also
Madeline says
Hello Sarah
I received £180 this morning from halifax into my account saying it was from charges that i paid in 2017/18. They said they didnt do anything wrong but they might not have made enough effort to make me aware. Obviously delighted. Is this something that you have heard others receiving?
Sara (Debt Camel) says
Every little helps, especially in times like these!
I hadn’t heard anyone else saying this, I will keep an ear open for it.
Matt says
Hi Sara
Out of interest has anyone won a case of unaffordable lending on an overdraft or is this a different kettle of fish to large loans and payday loans?
Sara (Debt Camel) says
Yes but it isn’t so easy.
The argument is usually “you raised my overdraft limit when it was obvious if you had looked that I was in financial difficulty with defaults/payday loans/gambling”. See https://debtcamel.co.uk/refunds-catalogue-credit-card/ for how this sort of complaint warks with a different template.
Chris Bone says
Do you envisage the 3 months overdraft interest initiative to apply to everyone across the board, some people may have larger limits than £500 and operate within it and may be able to meet commitments (for the present anyway) whilst still using the overdraft? And it is interest wipe out up to £500, not interest deferral?
Sara (Debt Camel) says
Hi Chris, this is what the FCA say: https://www.fca.org.uk/publications/guidance-consultations/overdrafts-coronavirus-firms.
So far as I can see, the £500 interest free applies to customers who have coronavirus problems – and it is interest free not a deferral.
The “no customer worse off under new prices” applies to everyone for 3 months then “At the end of the three-month period, providers should consider whether customers who have benefitted from these guidelines are in financial difficulty. If they are, then the lender should provide forbearance under normal policies and processes.”.
Michelle Pierre says
Llyods have agreed on £300 for Overdrafts. Should I contact them with regards to £500
Sara (Debt Camel) says
Have spoken to them about the £300?
M Pierre says
I’ve had a text message to inform of the £300 limit. But if I am allowed £500 then why this is not being offered.
Sara (Debt Camel) says
Because the FCA just announced the £500 is a proposal this morning. There is a consultation period running until Monday morning. Then the measures come into force on Thursday next week.
Karolina says
long story short , my dad has a loan with HSBC which he never missed a payment on, until Corona hit, but HSBC have suspended payments for 3 months , so we have talked to them about this. HOWEVER, due to loosing his job he did the worst thing turned into gambling (well not anymore as I have taken control of if, which means he doesn’t have a smart phone , laptop or anything that he can play an online casino on). My thing is a month ago he didn’t had an overdraft with HSBC , but as he turned into gambling he requested 1000£ overdraft which got approved , THEN after few weeks he requested ANOTHER ONE for 2000£ and if that wasn’t enough he requested third time for 3000£ which also got approved even though they saw that all money went to gambling sites. I know it’s only his fault and probably mine that I didn’t see it in time , but I feel that HSBC should of never agreed the last two overdrafts when they saw all going into gambling sites !! My question is , is there anything I can do ? Maybe complain to HSBC I know it’s sounds super dump because he knew what he was doing , but I feel that HSBC didn’t look at it properly too. Any advice welcome . Thanks
Sara (Debt Camel) says
I think he should complain, not about the first overdraft request but about the increased credit limit when they (a) knew he had problems because of coronavirus and (b) would have seen the gambling on the account if they had looked. Ask for all interest and charges to be stopped so he can just replay the balance. If they refuse, send the complaint to the Finacial Ombudsman.
Richard says
Hi, I have been in a dispute with Santander for several months over my small overdraft (£300) and charges applied. (This is no longer the account I use, with only the fees left as the outstanding balance at approx £150). I made a formal complaint which they failed to respond to, and I subsequently escalated this to the ombudsman, this is in the early stages. I still have a savings account so logged into my only banking today to find the current account has been completely deleted. I am concerned now, have they written this off? Or would they have sold the debt with and ongoing complaint. Thank you for your advice
Sara (Debt Camel) says
I don’t know, but it doesn’t really matter if they have sold the debt, your complaint to Santander will continue.
Cherrelle says
Hi I had an arrangement with the bank to repay an outstanding overdraft as I switched to a different bank. I lost my job just before Coronavirus and defaulted on the arrangement. I called them and Informed them of this and no payment holiday or any help was offered during Coronavirus. I was told I had to at least pay a minimum payment. I did so and was late on one payment last month and have now been defaulted due to losing my job again. Is there anything I can do?
I have credit cards and other debts also but no late payments with them
As I was on a payment holiday with all of my cards.
Sara (Debt Camel) says
ok, so how easy is it going to be to find another job? And if you do, will you then be able to afford all the minimum payments as the interest will have been increasing?
This overdaft was no longer active, it was already in a payment arrangement. What were the terms of this arrangement? And did it show on your credit record?
Cherrellea says
I have found another job and in employment full time with a contract paying monthly credit cards has been reinstated as I was on a payment holiday for all.
Yes the overdraft was no longer active. The terms were that I paid £200 a month which I didn’t want to commit to I tried to agree £50 and the bank said no so and that £100 was the minimum last month I couldn’t afford it and I paid £50 of which I could and now have been defaulted. I tried to contact the bank on the bank on several occasions but due to Coronavirus the phone lines are always and I could never get through.
The account is closed and there are no overdraft charges. It was a student account with a free overdraft. I switched banks and need to pay the outstanding overdraft to fully close the account
Sara (Debt Camel) says
was the £200 a month less than the monthly overdraft charges? and have the monthly overdraft charges continued while you are in the payment arrangement?
kate says
Hi Sara,
I have an overdraft of 4,500 with TSB, contacted them back at the start of lockdown in April to ask for the interest on my account to be lowered and the £500 interest free to be put onto my account, i have had this is place for a 6 month period and now as of 31st October that has come to an end, i contacted them last week asking for more help because I’m going to struggle to pay the 40% interest on the amount i owe as i have other credit cards to pay off, they have actually refused all help, wont even lower interest rate to help me lower the balance, i have an ongoing complaint with them about them upping my limit so high that it is unaffordable for me, but that was only done two weeks ago and i understand this can take a long time to get a reply, the FCA states that banks have to help customers who ask for it, so why am i being refused help? do you have any advice for me?
Sara (Debt Camel) says
Are your finances affected by coronavirus?
Are you managing to pay more than the minimum to your credit cards?
kate says
Hi Sara,
Yes my hours have been lowered since returning to work from being furloughed, i have been told today from my employer that i will be furloughed again from Thursday.
At the moment i am paying just the minimum to my credit cards
Sara (Debt Camel) says
At the moment the FCA hasn’t said anything about whether banks will have to provide extra help to people with overdrafts. This will be known in the next week or so I guess. You could wait and see if there is anything helpful there?
If your wages will be dropping with furlough, then you will be struggling to pay the credit cards I guess. One thing you could look at which would cover the cards and the overdraft if StepChange’s Coronavirus payment Plan? A temporary measure for 12 months whether interst and fees are frozen to give you time to recover from these income shocks. See https://www.stepchange.org/how-we-help/covid-payment-plan.aspx and talk to StepChange about this – that wpuldn’t commit you to anything but it might be a helpful option that would make the whole of the next years easier.
Kate says
Great, thanks you Sara, do you know if this will affect my credit score badly if I take the coronavirus payment plan?
Sara (Debt Camel) says
It will harm your credit score. How badly depends on how good it is at the moment.
But you may need to start clearing your debts, even if this does harm your credit score for a while.
Nigel says
I use to have a overdraft with Halifax (my current bank)
It was for 2k I think I paid over 600 on charges 100 they refund on phone as gogw
Anyway they kept increasing it even when there was anything in my account
The only reason I have not raised a complaiment, is can they refund me and close down my account?
Or in future refuse a mortgage application with them.
Both are much worse then a 500 refund
Sara (Debt Camel) says
It is up to a bank who they want to lend to.
But my guess is that you aren’t in a good position at the moment? Wouldn’t £500 to pay off some bills or debts be a real help? Unless you can get into a really good position and save a 10% deposit, I wouldn’t let vague worries about getting a mortgage stop you making a complaint if you fee your overdraft limit was too high.
Anyway it’s pretty easy to get a bank account with another bank! And there are plenty of other mortgage lenders…
Nigel says
Yes it would help, if they close my account will it go on my credit file?
I’m not in a bad position I have no defaults or ccjs etc ALL my debts should be cleared my march just one left of 5k (started off over 10k)with a bank, that might even be cleared…
End of next year ALL my debts will be cleared if not before I can get 10% deposit from my mum and if I wait about 6 more months I can get my shares from work minimum of 18k probaly more
The biggest thing I have on my credit file is10-20 missed payments, because of arrers, however hopefully they will removed as I’m going through fos and also have payday loans which will be over a year or 2 old and all paid back eatly
3-4 banks I already got in debt with over 10 years, no longer have thouse accounts Lloyds, hsbc, NatWest , ago so what keep any bank I have a chance with open.
Sara (Debt Camel) says
A closed account will show as a closed account on your credit record.
I can’t guess how likely you are to have all those missed payment markers cleared. That is a lot.
At the moment most lenders won’t offer you a mortgage with any payday loans in the last two years.
“3-4 banks I already got in debt with over 10 years, no longer have thouse accounts Lloyds, hsbc, NatWest , ago so what keep any bank I have a chance with open.”
If you are asking what other bank could you get an account with, then Barclays, Nationwide, Monzo. Nationwide are a major mortgage provider.
Ren MZ says
Hi,
Does anyone know if switching a bank account is possible while you are overdrawn? I am currently £900 overdrawn with Halifax and receiving my wages into this account which are roughly £1100 per month. I would like to switch it to my Starling account so that I have just the one and I prefer Starling however I would not be able to pay off the overdraft at once.
Does anyone have any experience with this? Is there a way to keep the old account open until the overdraft is payed off without using it or does it need to be paid immediately?
Thank you in advance.
Sara (Debt Camel) says
You just get your wages paid into the Starling account, then you can set up a standing order from Starling to HSCB for the overdraft fees each month.
Graham says
This time last year I had an OD of £2350 and £1200 on C-Cards. £110 a month approx in charges and interest. A week on Monday, I will have £500 of OD left to pay up, everything else paid. It’s not been easy paying off £3000,
I made myself a budget on an Excel spreadsheet. It was my saviour, I knew exactly what was coming in, exactly what was going out and exactly what I had left, I could then pay a proportion of what was left to my debts. It took a while and some months I felt I wasn’t getting anywhere when car repair bills came in, but, I stuck to it and I’m nearly there.
frsnk says
I have a £600 overdraft with halifax, interest is about 65p a day. I have opened another account as im on benefits, buti cant afford to pay much from this new account to pay off overdraft. Whats best way to proceed with this? Im also paying the higher overdraft apr because of my credit history. Is this fair?
Sara (Debt Camel) says
What other debts do you have?
frank mcdonnell says
No other debts apart from about £100 on a credit card.
Sara (Debt Camel) says
Then I suggest you explain your situation to Galifax and ask them to stop adding charges . This will harm your credit record.
You can also say it’s unfair that you should be charged a higher rate because of your credit history as that just traps you in debt for longer.
DA says
Hello, After a little advice. I had a Current Account with Lloyds TSB 2012-2015, In had several increases of the overdraft, that were unaffordable, it ended up as a CCJ.=. I Have submitted an unaffordability complaint. They’ve come back today and said it’s out of time. I have escalated to the ombudsman and have said I have only recently become aware of unaffordability. is there anything I can do.
Sara (Debt Camel) says
Just wait for the Ombudsman decision – come back here is if is No.
Franky says
Update- I put in a claim to halifax as they increased my overdraft to 1000 even though I’m on benefits. They done no checks.And they put me on the higher apr of nearly 50%. . They rejected my claim today, they gave me just a 3 month interest freeze. I put in a complaint with the ombudsman. Whats my chances of success?
Sara (Debt Camel) says
I haven’t seen enough cases go through to have a feel for what the general uphold rate is. And any individual case depends on the facts of that complaint – I can’t guess at the chance you will win the case. I am not saying it is low, just I have no idea what it is.
Shelly says
Hello, after the overdraft changes in 2019, Nationwide wrote to tell me they were cancelling my overdraft & gave me 1 month notice. I was using my overdraft sensibly & could afford to run it but couldn’t afford to repay it in full. They offered an unaffordable repayment plan. This led to me take out a DMP (Payplan) & to consolidate my debts. They have put a default against me which seems unfair when I had ran my account well for over 8 years. Should this default had been issued? Thanks
Sara (Debt Camel) says
How large was your overdraft at that point? Were you in it for much or all of every month?
The unaffordable repayment plan – was interest being added? Over how many years?
Shelley says
The overdraft was £1000, they initially wanted it all within 30 or 60 days ( I can’t remember). I then managed to negotiate £150p/m but this was not affordable. They cancelled future interest when the 30/60 day notice period. They sited FCA rule changes and that I didn’t meet their new lending criteria.
Sara (Debt Camel) says
Ok, well I haven’t seen anyone try this sort of complaint before, but you can say that it is unreasonable that you should have a default on your credit record for something that is not your fault – the lender changed their policy, your situation did not change.
Pee H says
Does anybody know for how many years will the ombudsman consider claims for unfair overdraft charges? I did hear 15 is this true???
Sara (Debt Camel) says
The claims can’t go back before 2007, that was when the law changed. Ombudsman rules say they can look into complaints about something in the last 6 years OR when a person has complained within 3 years of finding out they had cause to complain.
Pee H says
Thanks. Perfect advise. Cheers.
Sara M says
Hi Sara,
Firstly, thank you so much for your past advise regarding 2 credit card debts I have had for many years. Both turned out to be unenforeceable, one has accepted a settlement of 5%, I am sending my offer to the other today. Thank you so much.
I only have one debt still outstanding now. It is a Barclays Overdraft. They closed my account approx 20 years ago and I have been paying £1.14 a month ever since to Barclays Collections. They have never asked me to increase my payments and don’t contact me. The balance is now £1282.76. Is it possible they will accept a settlement amount, as with CC’s, or will they expect the whole amount to be payed?
Thank you.
Sara (Debt Camel) says
You can offer a settlement but its unlikely they will accept 5% unless you have big health problems. They may want you to complete an income & expenditure form to show that you can’t pay them more each month.
Andy says
Hi, I have been paying a debt management co for an overdraft that defaulted in 1998. Recently I asked for paperwork relating to the old debt but have been told that the bank does not have this. If I stop paying the agreed monthly payments, where do I stand please?
Sara (Debt Camel) says
how much remains? Do you have other problems debts at the moment?
Andy says
Hi Sara
£11000 on the debt from 1999 and yes, I have other debts
Sara (Debt Camel) says
Ouch.
How large are the other debts? Do you have any realistic prospect of paying these off?
do you mind saying if you have any health problems? How old are you?
Who is the debt collector that owns this debt?