I had a "well D'uh!" moment this afternoon. After I collected my new glasses (see below), I popped into the bank to deposit a cheque and ended up having a chat with one of their advisors. In the middle of her trying to sell me one of their "new, improved" cheque accounts complete with shiny fees, we both had an epiphany.
Her rationale for "upgrading" my account to a shiny new one was that it because it has a much lower rate of overdraft interest, even with the fees it'd be cheaper. They're currently charging nearly 20% p.a. on overdrafts for accounts like mine. Plus they've imposed a monthly fixed fee of £5 for each month in which the account goes into overdraft. And even with last year's good effort, I'm still overdrawn for much of the month. If I didn't want to do that, she suggested, what about taking on a bank loan and transferring my overdraft to that? Or utilise a 0% credit card offer? "I've got a 0% credit card offer. I used it to pay for the freehold to my flat," says I.
"And why haven't you transfered your overdraft to that?" she demanded.
At which point, I stared at her. And the penny dropped.
I could do that. And I could continue paying down that debt and pay it off faster because I wouldn't be clobbered by interest and charges each month. The effective interest rate is about 4% p.a. instead of 20% p.a., so why haven't I done it before? (4% because that's the rate of the balance transfer fee. I'm simplifying, of course.) The 0% rate runs out in November - that should be enough time to clear the overdraft, while continuing to pay down the balance already on there for the freehold.
There are risks. The biggest being that I could drift back into overdraft, ending up worse off than where I started: heavily overdrawn but this time carrying a similar balance on a credit card. Can I trust myself not to do that? A year ago, I don't know, but now I think so. I've paid a lot of debt off in the last year. I track my spending. I've put money into savings. I've recovered from the drain on my finances of having an empty flat (better, the tenant has just signed a new 12-month lease with a rent increase of £25/month). And my salary's gone up (I've had two raises).
When I got home, I logged into the credit card website and made the transfer. It does make sense.
PS: About the title, one of the podcasts I listen to is the Knitcents podcast. Roue, the host, does a segment called "How I Saved The Week" where she lists her latest efforts to save money. I've stolen it from her.