All of us have used our overdrafts from time to time. That’s absolutely fine – it’s what they’re there for, after all. But if you start finding that you’re living in your overdraft and each paycheck only gets you back to zero, it can be dangerous.

Chances are you won’t have savings and if there’s an emergency you may not have the credit or capacity to cope. Here’s our step-by-step guide to provide help getting your out of your overdraft.

Step 1 – work out how much you’re paying

Not all overdrafts are equal, and some banks charge more than others. The first thing you need to do is work out what rates you’re paying.

Compare all the banks. If yours isn’t offering the best deal you may want to consider switching. Some banks will even give you an interest-free allowance, which can reduce your payments.

Child Blowing Dandelion

It is some important to check what kind of overdraft you have, as not all are equal.

Step 2 – make sure you’re not hitting your overdraft limit

Check your bank account regularly and keep a note of expenditure to make sure you're not accidentally going over your overdraft limit.

If you do go above your limit, speak to your bank urgently to see if you can extend your arrangement. Unauthorised overdrafts are an extremely expensive way to borrow money and you could find yourself stung by hefty charges on top of the interest.

Step 3 – consider a 0% credit card

If you’re trying to clear your overdraft, you may want to consider getting a 0% credit card, if you can. These cards allow you to transfer your debt (usually for a fee) and give you a set period – often two years or more - where you won’t pay any interest.

This allows you to make sure the money you’re paying back goes towards clearing your debt rather than on interest.

Ideally, you’ll want to pay the debt off before the interest-free period ends. Divide your debt by the number of months you get the introductory rate on, and you’ll know how much to pay each month.

Remember, you need to make sure you always make regular monthly payments to pay back the creditor, or you could lose the 0% offer.

Consider a 0% credit card

Ensure that you pay back your credit on time, or you could lose your 0% offer.

Step 4 – look carefully at your budgets

If you’re finding that your salary only takes you back to 0 each month, you need to review your budgets. After all, the only way to clear debts is to make sure that you’re spending less than you earn each month.

Sit down and look at all of your spending for the past three months and see where you can make savings. This could be small things, like switching to supermarket-brand chips or limiting the number of meals you eat out.

Even tiny changes like buying two fewer coffees a week soon add up to big savings and can help take you a step closer to not living in your overdraft.

Step 5 – consider using your savings

It usually doesn’t make sense to have savings if you have a hefty overdraft. This is because the interest you pay on the overdraft is usually more than you make on the money you’ve put aside.

Compare the two rates and if your overdraft rate is higher, it's a good idea to use your savings to pay back some or all of your overdraft.

Mother and Child Playing with a Kite in the Sunset | Consider Using your Savings

If it is too tempting to use your overdraft, then you could consider a basic bank account.

Step 6 – plan for the future

Once you’ve got rid of your overdraft, it’s time to start thinking about the future. Building up a rainy-day fund means that if there’s an emergency you can sort things without going back into the red. Once you’re debt-free it makes sense to plan so you stay that way.

Step 7 – don’t be afraid to ask for help

If you can’t cope and are worried your overdraft is getting on top of you – ask for help. Visit PayPlanStepChange, the National Debtline or Citizens Advice to find out how to best manage your debts.

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