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How to cut back on overdraft costs
Overdraft costs get a bad reputation as unauthorised fees hit the headlines recently with many experts calling them unfair and confusing prompting some banks, such as Lloyds, to scrap the fees altogether. From November this year, any Lloyds customer who goes over their overdraft limit will face no fees at all however customers at many other banks do still face these charges.
So how do you cut back on overdraft fees and manage your money to stay away from your overdraft or deal with the debt effectively? Here are our tips to help you deal with your overdraft.
- Always know what is in your account
The best way to avoid debt is to be aware of how much money is in your current account and any savings accounts you may have. By keeping on top of the money you have available, it should help you plan and manage your money so you are less likely to end up in your overdraft at the end of the month.
- Avoid an overdraft, move the debt and pay it off
One way to avoid going into your overdraft is to move current accounts to an account which doesn’t have an overdraft facility. This can be a good idea for those who have struggled in the past to stay out of their overdraft. You could also switch banks to an account which offers a 0% overdraft on your account and then you would avoid overdraft fees altogether.
If you are already in your overdraft, you could move the debt onto a 0% interest rate credit card, preferably one that stays at 0% for 24 months or over. This would give you the opportunity to pay down the debt over a time period which is more manageable for you and your financial situation without building up any more debt in interest on top of the debt already outstanding.
Another option is to use any savings you have to pay off the debt quickly and easily and avoid any further interest being added to your current debt. Although it is good to have savings to fall back on, it is worth using them to pay off debts when you can so that you have a clean slate, owe nothing and are able to enjoy the money you save over the coming months.
- Remember that an overdraft is a debt
Many people forget that their overdraft is a debt and you should always treat it as such when dealing with it and prioritising repayments. When dealing with your debts, discover which has the highest interest rate and pay that off first whilst making minimum repayments on the others. Once the highest interest rate debt is paid off, you can move on to the next highest interest rate debt until they have all been paid off.
- Get advice if you are struggling
If you are struggling with your overdraft and/or other debts, you should obtain some advice. If your only debt is your overdraft, you can get in touch with your bank to inform them of your situation and ask for help with regards to dealing with it. They may be able to help you extend your overdraft, waive fees or reduce the interest you are paying on your overdraft debt.
For advice on a range of debts, you should get in touch with a debt charity or ourselves as we can provide you with the help and advice you need to get yourself back on track financially and deal with your debts.
- Can you claim back charges?
Although some banks are planning on scrapping their charges, many are still implementing them and they cost the customer. By exceeding your overdraft limit, you are opening yourself up to per day or per transaction fees which will be added onto the debt you already owe your bank. This can see some people enter into a spiral of debt which they struggle to get out of.
However, if the charges you incurred pushed you into financial difficulty then you may be able to reclaim those charges as unfair costs against you. You can do this by writing a letter to your bank and if you are struggling in the meantime, obtain some debt advice.
- Manage your money
Keeping on top of your finances and managing your money is extremely important to help you stay out of debt. There are a number of things you can do to help you stay in credit and avoid your overdraft including:
- Budgeting your money so you know what you have available each month and how much is going out of your account.
- Cut the fees you are paying by switching accounts to something which offers you a better deal
- Opt for direct debits as they allow you to choose the date which is best for you when a payment leaves your account, helping you to plan your finances better on a monthly basis.
- Always open your post so you know how your finances and bills stand currently and even if you are not in debt, you can still obtain money advice from a range of free services.
- Cut back and stop spending on the unnecessary things such as clothes, magazines or nights out and also try to lower your monthly bills to give yourself some more money to play with every month.
If you are struggling to manage your overdraft or any other debts, get in touch with us on 0800 901 2488. Our friendly, professional advisers are here to help you get back on track with your finances and provide you with the best debt solution for you.
References and further reading
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