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Overdraft .. paying back?


carty23
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Hey all,

Just been to the bank today and upgraded my account to a student account. With this, I currently have a £200 interest free overdraft, which goes up to £1000 after I receive my second payment from student loans. I was told that I could start using my £200 overdraft today. However, when do I pay this back? There is nothing in the terms and conditions saying when the bank wants to be repaid. I get paid from work every month and will have a substantial amount of money in my account from the student loan (starting next week). So am I right in thinking that if I went into my overdraft by £30 today, the bank will just automatically take the £30 back when enough money next goes into my account?

Many thanks

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Hey all,

Just been to the bank today and upgraded my account to a student account. With this, I currently have a £200 interest free overdraft, which goes up to £1000 after I receive my second payment from student loans. I was told that I could start using my £200 overdraft today. However, when do I pay this back? There is nothing in the terms and conditions saying when the bank wants to be repaid. I get paid from work every month and will have a substantial amount of money in my account from the student loan (starting next week). So am I right in thinking that if I went into my overdraft by £30 today, the bank will just automatically take the £30 back when enough money next goes into my account?

Yes your right and you can keep going in to your overdraft every month.

My advice = dont have an overdraft if you can help it.

Dale

Many thanks

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I agree with Dale also, if you can help it dont go into it. As far as i remember a friend went into theirs up to the max and as soon as they were not a student anymore the 0% interest stopped and they were being charged for it every month. If they have not already they will try and push a credit card on you, again dont. More hassle than its worth.

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Say you have £100 in your bank and the overdraft is £200

You withdraw able balance is £300.

So if you take £200 out you are in effect have -£100 but it will show as £100

If your wage went in of £155

You would have a total balance of £255 but only £55 of that is actually yours...

I agree with Dale also, if you can help it dont go into it. As far as i remember a friend went into theirs up to the max and as soon as they were not a student anymore the 0% interest stopped and they were being charged for it every month. If they have not already they will try and push a credit card on you, again dont. More hassle than its worth.

I would get a credit card... but don't use it. You never know when you might need to!

If you do use it pay it back straight away.

If I buy a train ticket the only card I can use is my credit card.

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Hey all,

Just been to the bank today and upgraded my account to a student account. With this, I currently have a £200 interest free overdraft, which goes up to £1000 after I receive my second payment from student loans. I was told that I could start using my £200 overdraft today. However, when do I pay this back? There is nothing in the terms and conditions saying when the bank wants to be repaid. I get paid from work every month and will have a substantial amount of money in my account from the student loan (starting next week). So am I right in thinking that if I went into my overdraft by £30 today, the bank will just automatically take the £30 back when enough money next goes into my account?

Many thanks

Yeah that's what happens. An overdraft allows you to go into minus numbers.... so if you have £80 in you can spend up to £280 if you have a £200 overdraft. Be VERY careful about going over your overdraft limit though... you get loads of charges for doing that.

Whenever any money goes into your account, it pays off the overdraft... so if you are at -£20 and you put £100, your balance will be £80. But if you have the £200 overdraft you have an "available balance" (i.e. what you can spend) of £280.

As a student, you will get this perk for the time you are at uni. There are usually conditions such as your student loan must be paid into this bank account. It will increase every year. There is usually then a period when you graduate when the overdraft goes down each year, but is still interest free - although some banks might charge interest after you stop being a student. Students often rely on their overdraft but you should be very careful, as I've seen lots of people get in trouble with this as they see it as free money. The bank can terminate the overdraft at any time, and demand full repayment. My advice, use it only as a stop gap, use it only when you have no choice or put the interest free overdraft (or part of it) into a savings account and earn interest on it.

I assume you are a Special being on here. Do be careful re getting into trouble with this, as I'm sure you are aware, police officers aren't allowed to have financial problems.... they say, in theory, it opens you up to the potential of bribery.

I hope I've explained this ok!

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I agree with the others that have said to avoid using it if at all possible. Do you think your student loan will be enough to cover your expenditure during university? If not then you have to consider your options first, before dipping into an overdraft (ie outside income such as a part time job or money from parents). If you don't feel either of those are viable then if you feel you need to then you can make an informed decision about using the overdraft.

In terms of getting a credit card as someone stated earlier - I strongly recommend you do not do this. They will charge you a fortune if you don't pay the amount in full every month, and those in full time employment often struggle to pay these back, so as a student you will find it exceptionally difficult.

There's also a myth that you need a credit card to improve your credit rating. It may be true for a minority of people but there are far better ways of doing it like simply keeping your bank account in credit each month (ie not using your overdraft :(), and taking out a contract mobile phone and paying it on time every month (this is cheaper than PAYG as well).

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It sounds great, FREE Money... however just remember its only free while you're a student. Plus, they increase it (my bank did) by £1000 every year. Even better you're thinking. Then you graduate and your bank says they'll extended it by another £1000 while you look for a job! What nice people! A year after that you get yourself a job and then bank go, "Right... we want our £4000 back please and we're going to charge you interested every month until you do!!!

Getting rid of my overdraft was the best thing I've ever done

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My advice, use it only as a stop gap, use it only when you have no choice or put the interest free overdraft (or part of it) into a savings account and earn interest on it.

I second this entirely. when I was at Uni I put the £1,500 interest free overdraft into an ISA from the same bank, it was earning me around £10 a month in interest (over 3 years that makes £360!) Then it's always there, should the bank ask for it back, it's a quite transfer online and your sorted.

You have to be careful though, stay on top of your finances and don't get carried away with spending. Save the overdraft for emergencies and always have some contingency money just incase. (I always kept £100 above my overdraft limit just incase a bill payment etc went out at the wrong time) If you want to go out partying all the time then get a part time job to finance it rather than using the student loan and overdraft! thumbsup.gif

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Years ago when I left Uni the bank took my very large interest free overdraft and converted it into a 'managed loan' with monthly repayments and a reasonable interest rate, I wasn't earning much when I first joined the work force but it was a manageable repayment and I wouldn't have been able to stay in college without the overdraft facility.

However, as others have said, if you can get by without using it then it's best to do so as you'll be in enough debt if you've been whacked with a £9,000 per year bill for your education.

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In terms of getting a credit card as someone stated earlier - I strongly recommend you do not do this. They will charge you a fortune if you don't pay the amount in full every month, and those in full time employment often struggle to pay these back, so as a student you will find it exceptionally difficult.

Agreed as well. The only thing I ever used my Student Credit Card for was purchases of items over £100 so that you had the protection that is afforded by that incase something went wrong, but I'd always log straight onto my online banking and transfer the money to pay it off so that no interest was paid. Remember, if you can afford to pay it off in full, do it! If you can't then don't make the spend in the first place!

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Agreed as well. The only thing I ever used my Student Credit Card for was purchases of items over £100 so that you had the protection that is afforded by that incase something went wrong, but I'd always log straight onto my online banking and transfer the money to pay it off so that no interest was paid. Remember, if you can afford to pay it off in full, do it! If you can't then don't make the spend in the first place!

I agree with what you are saying, although I would get one and not use it... better than needing it and not having one!

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Many thanks for all the advice, it is greatly appreciated and I will certainly take it on board.

The reason I asked in the first place was because I currently have almost nothing in my bank account, and won't have until my student loan goes in on Wed/Thurs, and then I get paid on Fri from my part time job. But in the mean time (for Mon and Tues) I am going to need money for petrol to commute to uni, money for parking and money for food. Therefore I was intending to dip into the overdraft just to cover these 2 days. After these 2 days, I probably won't ever need to use it again because my student loan, grant and bursary is quite a lot (3 payments of £2100 over 12 months [due to my mum being made redundant last year reducing our household income). I also earn £290 a month from my part time job so my bank account is always going to have money in it. I was just curious as to how you actually pay the bank back.

As for the credit cards, I don't think I'll need one of them as I'm not really a big spender. I currently have 3 direct debits: AA Breakdown cover, Car insurance and mobile phone bill. I've never missed a payment for any so does this mean I'll have a good credit rating?

Thanks all once again. You can always guarentee helpful responses :) I'm clueless with the banking and finance world!

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Don't worry about dipping into your overdraft whilst your at uni. I have ended up using mine to pay rent over the summer, but it'll all be squared away once the loan is in etc. As long as your use your student account as your main account, the bank won't jump on you to pay it back instantly. If you're cheeky and take out 2 student accounts and max both overdrafts, they will want it back, it happaned to one of my mates, much to our amusement.

Have a cracking time at uni, and enjoy freshers ;) Remeber, the first year is the easiest, so enjoy it! For a large percentage of unis, doesn't go towards your final degree mark - you only need to in theory pass to stay on the course :)

Where are you going to study? I'm just going into my last year so now the pressure is on to actually do work... well, after freshers week ;) !

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Say you have £100 in your bank and the overdraft is £200

You withdraw able balance is £300.

So if you take £200 out you are in effect have -£100 but it will show as £100

If your wage went in of £155

You would have a total balance of £255 but only £55 of that is actually yours...

This isn't true of my Barclays account. If I have £100 of my own money in the bank and a £200 overdraft, on the screen it still only shows the balance as £100. 'Available funds' is the one that would include the £200 overdraft and therefore show as £300.

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Just beware of the fact that a bank can cancel an overdraft whenever they like, even if you are thousands of pounds into the red.

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