You may gaze longingly at some of the great deals in the market, yearning to switch to a bank that treats you with the respect and consideration you deserve. However, being stuck in your overdraft means you can’t even think about changing provider unless you pay it off….or can you?
If your account is an unhappy shade of red, it doesn’t mean that you can’t switch providers. The days of having to pay off your overdraft are firmly in the past and many banks will willingly take you on, even if you aren’t in credit.
Of course if you are buried deep within your overdraft, you won’t have as many choices as if your account had a healthy balance but providing you have a decent credit history you can still enjoy a good selection to pick from.
Here’s a guide to switching bank accounts when you are overdrawn.
Even if your finances have seen better days it’s still possible to switch bank accounts
So, it’s possible to switch without paying off what I owe first?
It certainly is! Many people believe that the only way to be able to change current account is by firstly paying off everything they owe. And if you rely on your overdraft to get you through the month, you may have given the idea up as a lost cause.
However, providing you have never gone over your overdraft limit, you will be able to switch bank accounts to a new provider without a problem. In many ways you are their ideal customer as they will earn more money from you that some-one who doesn’t need to borrow!
There will inevitably be some types of account or providers which will require you to be in credit in order to switch so the choice will not be quite as wide-ranging if you are in your overdraft. But there are still plenty of providers willing to take on a customer who is overdrawn without stipulating that the debt is paid off first.
How should I decide who to pick?
Obviously you may have certain criteria you are looking for from your new bank such as online account access or round the clock customer service.
However, one of the primary features you should also consider is the cost of being overdrawn.
First of all you will need to establish how much your existing account charges you for the luxury of having access to an overdraft; take into account interest, charges for accessing the overdraft as well as any additional costs of holding the account. Also consider the overdraft limit and how close to it you are; it’s never a good idea to be teetering on the edge.
Once you have this information, you can scour the market to find alternatives which will charge you less for having an active overdraft. The easiest and quickest way to do this is to compare bank accounts online use an online comparison site. With just one glance you can see who charges the least as well as any extra facilities which come with the account.
Using an online comparison site means you can check out the deals available at a time that’s convenient to you…no matter when that may be!
What else do I need to take into consideration?
Not all banks will be willing to accept you if you are arriving with an overdraft so check the application criteria to see if you qualify for the switch you want to make.
Some accounts may also stipulate that you pay in a minimum sum each month to get the best rates so make sure your finances match up before signing on the dotted line.
Even if your chosen bank is willing to accept you with an overdraft, they may not initially be willing to offer the full amount. If this is the case you can either just move half of your overdraft and gradually pay off the remaining balance or come up with another option.
As an alternative to moving your overdraft, you might want to check out the deals available on credit cards using the same comparison site. Many offer excellent introductory rates which could allow you to pay off your overdraft more cheaply plus you will qualify for more bank accounts as you won’t be in the red!
Regularly reviewing your banking arrangements is something everyone should do on a regular basis to make sure they are still getting the best deal for their money. And in some cases this may mean opting for a different approach to save money.
Sometimes it can feel as if you are the only person in the world who owes money but banks actually prefer this type of customer. So even if you are in the red, take heart in the fact that you still have plenty of options and can take advantage of many great deals available in the market!
Image credits: ricmcarthur and Ed Yourdon
