Overdrafts on current accounts can be painfully expensive.
The Halifax Reward account charges £5 a day for a current account. And even with an authorised overdraft, many accounts charge as much as 19% in interest.
One way to get rid of your overdraft is to transfer money from your credit card to your current account. Many credit cards allow you to do this. Once you've transferred the money, you can use it to pay off your overdraft.
Unfortunately, credit card companies usually charge very high rates of interest on this sort of cash advance, higher than you would pay with most overdrafts.
However, there are a few cards that allow you to transfer money from your card at 0% interest. In other words, these cards allow you to do a 0% money transfer.
1. You're transferring money from a card to a bank account, instead of transferring a debt from a card to another card.
2. The fee is often higher for a money transfer than for a balance transfer. Money transfer fees are usually around 4% whereas balance transfer fees are typically between 1.5 and 3%.
The top card
In many ways, the most attractive money transfer card is the MBNA Visa Credit Card. Once you've taken out the card, you have 60 days to do a 0% money transfer. So if you have a £2000 overdraft, you could transfer that sum from your card to your current account and you wouldn't have to pay any interest for 23 months.
That's a very long period for a 0% money transfer. You wouldn't have been able to get any card with such a long 0% period three or four years ago.
The biggest downside is that you'll have to pay a 4% fee when you make the transfer. Remember that's an upfront fee that you pay in one go. You'll also have to make the minimum repayment on the card each month. If you're late with a payment, the 0% deal will end immediately.
The other crucial point is that if you haven't paid off the resulting debt when the 23 months, you'll then start paying 16.9% in interest – unless you can transfer the debt to a second 0% card.
The main downside for the MBNA card is that you can only get one if you have a good credit rating. That's a shame as I suspect that many of the folk who would benefit the most from a 0% money transfer will only have an average credit rating.
Still, if you fall into that camp, don't despair, there's a good chance you'll be able to get the Capital One Balance Card Visa. You'll be able to do a money transfer and not pay any interest on the debt until you get your July statement. Obviously, the 0% period is much shorter than for the MBNA card, but the fee is a bit lower at 3% and, heck, if the Cap One card is the only one you can get, it's well worth going for.
So are there any other options?
Well, the Virgin Balance Transfer Credit Card is very similar to the MBNA card except that the 0% period for money transfers is only 20 months rather than 23 months. The similarity between the two cards isn't that surprising as MBNA operates Virgin's credit card range. Because MBNA operates the Virgin cards, you can't do a balance transfer from a Virgin card to an MBNA card or vice versa.
The AA Credit Card offers a 16-month 0% period and charges a 4% fee, and the Fluid card offers a 15-month 0% period with a 4% fee. Yet again, both of these cards are operated by MBNA.
If I'd been writing this article a year ago, I would have recommended switching to a bank account with a 0% overdraft as an alternative. Sadly most of the 0% overdrafts have disappeared recently.
The first direct 1st Account does still offer a 0% overdraft but it's only for debts up to £250 - that won't be enough for most people.
Another option is to take out a personal loan. If you have a good credit rating, you could get a personal loan for as little as 5.1% a year. That's going to cost you much less money than an overdraft at 19%.
If your credit rating isn't perfect, you may be offered a loan at a higher rate – say, 10%. A loan at that rate is still worth going for.
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Figures from charity Age UK show that 29% of those over 60 feel uncertain or negative about their current financial situation - with millions facing poverty and hardship.
Even though saving for retirement is not much fun, the message is therefore that having to rely on dwindling state benefits in retirement is even less so.
To avoid ending up in this situation, adviser Hargreaves Lansdown recommends saving a proportion of your salary equal to half your age at the time of starting a pension.
In other words, if you are 30 when you start a pension, you should put in 15% throughout your working life. If you start at 24, saving 12% of your salary a year should produce a similar return.