If you dip into your overdraft without arranging it beforehand, you probably know that you'll be charged for it. But do you keep track of how much you end up paying? According to research from Peachy, the typical consumer is charged £216 per year in unarranged overdraft fees, and this could add up to over £13,000 in your lifetime.
Not only are consumers paying a high price for dipping into their overdraft, but the figures also show that 64% of those were unaware that they'd be charged for it. The majority dipped into their overdraft by accident, too – and they did so an average of nine times per year, being charged an average of £24 each time – but that won't stop you from being charged.
The key to avoiding this kind of situation is to make sure that you're prepared. If you think you'll need to dip into your overdraft from time to time, then make sure you arrange it with your bank beforehand, as the fees associated with authorised overdrafts are often far less than with unauthorised overdraft use. But, they can still put a dent in your wallet, so be on the lookout for current accounts that specifically offer low overdraft fees, too, as this can ensure you keep any costs to a minimum.
Another good tip is to set up text alerts with your bank. Many current account providers offer this kind of service, whereby they'll text you if you've dipped into your overdraft, and will often give you until the end of the day to pay in funds and avoid charges being levied. This could be a lifesaver, particularly if you dip into your overdraft by accident, and can be a great way to keep on top of things.
However, if you end up in your overdraft on a regular basis and rely on it to make ends meet, it could be a sign that you're getting into financial difficulty. This means it's time to take action. You'll want to start by taking a cold, hard look at your budget so you can identify any areas that you could cut back on, as that way, you may find that you're able to make it to the end of the month without dipping into the red.
See if you can cut the cost of your regular outgoings, too. Comparing gas and electricity tariffs can be a great place to start, as could comparing insurance quotes if it's time to renew, and make sure you're not paying too much for your phone and broadband package, either.
You may want to look at your debts as well. If you're paying out a lot in terms of credit card repayments, why not switch to a balance transfer credit card? You'll still need to make at least the minimum repayment, but you won't be charged interest for a set period, which could mean you're able to clear the debt sooner. Alternatively, consider consolidating your debts with a low-cost personal loan – personal loan rates are incredibly competitive at the moment which means you could well end up with lower monthly repayments, and you'll have a clear route out of debt, too.
A bit of organisation and pro-active financial management could be all it takes to get you away from spending a fortune on unauthorised overdraft fees, so make sure to take control and you may find you're able to save hundreds of pounds a year.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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