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Reduce the cost of YOUR OVERDRAFT

Editor of Themoneyed­, Kalpana Fitzpatric­k shares her expert tips on cutting down overdraft charges


This year has seen household incomes squeezed with higher living costs, leading to more of us relying on credit. For many, this includes drifting into an overdraft in a bid to make that pay cheque go further.

More than 26 million households use overdrafts each year*, but doing so could see you pay a huge 40% interest. If you do need extra cash, then an overdraft is a costly way to get it.

Our finance expert Kalpana Fitzpatric­k shows how to avoid charges and getting into debt.

Switch accounts

Leaving your bank may seem a bit like breaking up with a longterm partner, but if your bank no longer serves your needs, it’s time to switch. If you occasional­ly rely on an overdraft, then move to a bank that offers an interest-free overdraft buffer. For example, First Direct offers a £250 interest-free arranged overdraft, but anything above that will cost an eye-watering 39.9% in charges. And Nationwide Building Society’s Flexdirect account offers 0% arranged overdraft for a year, but after that it’s also 39.9%.

Before you open an account, check your eligibilit­y on the bank's website to see if you’ll be accepted, as you will need a good credit score.

Reduced charges

If you are not eligible for a free overdraft deal, you could move to a bank that offers a lower rate than the typical 40%. Monzo charges 19%** if you have an excellent credit score, otherwise: 29% to 39%. Starling Bank charges 15% to those with good credit scores, or it’s 25% to 35%. Cumberland Building Society charges 14.99%. Triodos charges 18%.

Use your savings

If you have cash savings, it’s natural that you may not want to touch them. But chances are, you’re not earning much interest on them anyway. So why pay sky-high interest rate charges to borrow from your current account, when you have the money elsewhere?

Budget review

If you’re struggling to make your income last all month, then it could be a good time to tighten your household budget. Take a close look at money coming in and going out and ask yourself if you can make any cuts – even if it’s just for a few months. Reviewing your utility bills and mortgage can help slash thousands off your annual living costs. Take a look at the Citizens Advice budgeting tool to help you save (citizensad­ debt-and-money/budgeting).

Get help

If you are struggling financiall­y, talk to your bank as soon as possible. They may come up with a repayment plan or even waive interest charges. If you have a serious debt issue, seek advice from a charity, such as Step Change ( or the National Debtline (nationalde­


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