Overdraft free in 5 easy steps

Most bank accounts come with an overdraft, and it is very easy to fall into the temptation of thinking of the overdraft as your spending limit and not as the emergency borrowing facility that it really is.

Street UK - Overdraft free in 5 steps

Dipping into your overdraft too often and not paying it back can get you in financial trouble, as overdraft interest fees can be quite high. To avoid this there is a right way to use your overdraft, these 5 easy steps will help you keep your overdraft under control:

1 – Budget and cut back

It might sound scary, but budgeting isn’t as hard as it seems – take a look at our Beginner’s Guide to Personal Budget. After you have a clear picture of how much and where you spend, you can see exactly where you can cut back comfortably. The spare cash you’ll have from cutting back can be used towards paying your overdraft.

2 – Reduce your overdraft limit

Call your bank and ask if you can reduce your overdraft limit as you reduce the amount you owe. for example, if your overdraft was £400 and you managed to pay £100, ask to reduce the limit to £300 and keep calling and reducing as you go. This prevents you from overusing your overdraft again.

3 – Switch current accounts

Some current accounts still offer interest free overdraft, do your research and find out which one is best for you. Here’s a list created by LoveMoney. Usually, the interest free accounts only last for a year, so if you think it will take longer than that to pay off your overdraft, this option might not be the right one for you.

4 – 0% money transfer credit card

Although it might seem weird to suggest you get a credit card to pay overdraft, a 0% money transfer credit card can help you pay off your debt without adding up the interest. That’s because these cards will allow you to transfer money from your credit card to your current account without charging interest. When using this, please be aware of handling fees, which are around 3% (still lower than most overdraft charges) and the expiry date of your deal, 0% transfer credit cards are usually valid for up to 24 months.

5 – Consider a low rate personal loan

If none of the solutions above are enough to pay off your overdraft or if you want to get it paid quicker, consider taking a low rate loan. You can use our online platform for that or visit one of our branches.