Ways to Pay Off Your Overdraft and Credit Cards
05.08.2019 by Jack H
The problem with overdrafts and credit cards are that they are akin to a mystical illusion of debt, as it’s almost like if you can’t see them they are not real. But this couldn’t be further from the truth as if you allow these kinds of debts to rack up, you could find yourself in serious financial trouble.
If you’re struggling to pay them, there are ways that you can deal with them so that you can start cutting the costs and paying them back on plans that suit you so you can avoid bank charges and late payment fees.
What Have You Got
This may sound like an obvious one, but if you are aware, month on month, what’s in your bank account you can avoid overdraft costs if you go over your limit. Make sure you often check your statements, whether online, paper statements or via an app from your bank, so you know when you’re nearing your limit.
You can also set up personalised communications from your bank to help you keep up to date, such as receiving text messages when you are close to the limit or emails with the same information.
Can Your Bank Help
This seems like the last port of call as let’s face it; banks make their money through not just using our funds in investments but also from the charges they implement when people are in debt. However, your bank has a duty to treat their customers fairly, so if your overdraft is big, then speak to your bank to see how they can help you.
You can discuss options such as extending your overdraft for the short term (long term may just push you into more debt) or if it’s a one-off where you have gone over the limit, ask them to either waive the fees or reduce them on the proviso you won’t let it happen again.
Choose a Cheap Overdraft
Some banks in the UK offer cheap overdrafts or 0% overdrafts once you have passed a credit check to get one. You can utilise these banks if you are a persistent offender of going over your overdraft to make sure you are not stung with big fees.
Repay the Worst First
If you have multiple debts such as credit cards, loans, and overdrafts, as well as a mortgage on your house, then write a list to see which costs the most, making sure you add up interest and fees to get a true reflection of what you owe.
Once you have this list, prioritise on what needs paying first such as if your overdraft needs sorting, then make minimum payments on other debts so you can focus your money on the overdraft. Don't try to save while you still have debts, that includes credit cards, moneysavingexpert has the low down on why this would be a bad move.
Put Them Away
Getting yourself out of debt requires not only money but also a great level of discipline, so avoid temptation and hide the cards! If you put them where you can’t use them and pay with for purchases with cash instead of plastic, this will not only help you pay off existing debts and not build up more debts, but it also helps you buy only what you can afford and not what you want.
Free Up The Cash
One way to speed up paying off your debts is by reviewing what your monthly expenses are and look for ways to cut your costs. If you track your spending over two weeks, for example, you can see where your money is going and where you are losing money on needless items.
By having an idea of what you are spending each week, you can see where you are perhaps being frivolous and see where you can cut costs. Cutting back on these nonessentials will save you money as drinking tea at home instead of buying one at Costa, or making a packed lunch instead of nipping to the supermarket each day could save you £100’s a month.
Set a Goal
If you have lots of debts, then they can seem overwhelming so instead of looking at them as one lump sum, consider breaking them down into realistic targets and goals. Set financial goals that you can aim for each month and, as mentioned above, try and achieve the goal of paying off the worst debt and the least flexible one first.
Not only will you be paying off the debts and keeping financial troubles at bay, but it will also make you feel psychologically better as you will feel like you are making progress on your debts. This positive effect will help you continue to clear your debts instead of thinking that there is no way out and that the debts are never-ending.
Have a Plan
Similar to the point above about if you can’t afford it, don’t buy it, making a spending plan will reduce the likelihood of getting in debt again. If you have a monthly spending plan, it will not only ensure that you are living within your means, it also gives you an idea of when you expect to be debt free.
There are many resources on the internet that can help you create a spreadsheet of what you spend and make the idea of budgeting seem less painful. It's paramount though that you stick to the plan if you are in financial trouble as planning ahead means you’re less likely to find yourself in debt again.
Financial worries can be overpowering, but if you tackle them head on and don’t hide away from them, there are many ways which you can not only pay off the debts you have but also make sure you don’t find yourself in financial trouble again.
Make sure you look for support from family and friends as well as organisations designed to support money problems as if you don’t feel you can do it alone, the support from these people will help spur you on and become debt free. You can seek external support through agencies wanting to help with debt such as the Citizens Advice or the National Debtline.