How to get out of your overdraft if you're in it all the time

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If you find yourself regularly dipping into your overdraft each month, or you’ve been in it consistently for some time, you're not alone.

Overdrafts are designed for convenient short-term borrowing, and can be an expensive way to borrow if you use them for long periods. But you might find that over time you come to depend on your overdraft, and struggle to get out of it. 

If you’re striving to become less reliant on your overdraft, there are a number of useful tips and tools you can use to cut costs and find extra money to pay off the balance. From creating a watertight budget, to paring back inessential expenses, to using a benefits calculator to check if you’re eligible for credits or benefits, we’ll explore some of these in more detail below.

1. Gain an accurate view of your total income and outgoings

You might think you’ve got a good idea of where your money goes each month. But making a budget can yield some surprising insights. The first step in gaining total control over your finances is to create a super accurate picture of your total monthly income and expenses. 

There are a number of great (and free) budgeting tools available online, with the Money Advice Service’s Budget Planner being one of the best. You’ll have a complete, downloadable overview of your finances in about 15 minutes (just be sure to take your time to make sure your budget is as accurate as possible).

2. Take advantage of Monzo’s powerful budgeting features

We’ve built a host of powerful budgeting features into the Monzo app to help you stick to your budgets and stop overspending. These tools can help you stop being so reliant on your overdraft. They’re useful even if you don’t use Monzo as your main account, but you’ll get the most out of them if you have your salary paid in. 

Take advantage of our Salary Sorter to automatically sort your wages into designated savings, spending and Bills Pots the second you receive your pay. 

We’ll automatically pay your regular Direct Debits and standing orders from your Bills Pot each month, so you can keep the money you’ve set aside separate from your main balance so you don’t accidentally spend it. 

Set monthly spending budgets for each category (like Groceries, Shopping or Entertainment) to help you keep to your spending goals. This’ll free up money you can use to pay down your overdraft. 

Check the Help section in the app or get in touch with us via chat if you need any help to get things set up.

3. Reduce unnecessary regular expenses

Equipped with your new budget, you’ve now got oversight of all your regular outgoings. So you’re in a great position to start cutting back on any unnecessary or unwanted subscriptions, and to begin shopping around for better deals on utilities and other services. 

You may have a gym membership you’re not using, a music streaming subscription you forgot to cancel, or feel you could use a break from Netflix for a few months. 

Switching energy and other utility suppliers is also a surefire way to bring your monthly bills down, as these companies typically rely on customer inertia to keep people paying tariffs they could find cheaper elsewhere. If you pay your energy bills from your Monzo account, you can use our Energy Switch feature to switch in seconds.

Websites such as Martin Lewis’ Money Saving Expert website can be invaluable resources for finding the best deals out there, and will give you a great starting point for what you should be paying for many things. You can put any savings you make towards paying off your overdraft balance each month.

4. Ask us for help with getting out of your overdraft

If you could use a bit of structure when paying down your overdraft, get in touch and we’ll be happy to help. 

We can work with you to create a monthly repayment arrangement that lets you pay down your overdraft in regular, manageable instalments. Having a plan in place can make all the difference as you work towards your goal to get out of your overdraft!

5. Check if you’re eligible for credits and allowances

Each year in the UK, billions of pounds in credits and benefits go unclaimed because people aren’t aware they’re eligible for them. You can easily check if you’re entitled to income-related benefits, tax credits and more using a benefits calculator. You’ll just need your budget to hand, and it should only take around 10 minutes.

6. If you’re still struggling, consider paying your priority bills first

If after budgeting and reducing your expenses you find you’re still short of money to cover all your outgoings, you should consider paying any monthly priority debts first. 

Priority debts include things like rent and mortgage payments, council tax and energy bills. The consequences of not keeping up with these payments are more serious than falling behind on non-priority debts like your credit card bill, entertainment subscriptions or unsecured overdraft. You can learn more about priority vs non-priority debts here.

7. Get free debt advice

If you’re experiencing financial difficulties and struggling to keep up with payments, you may wish to seek debt advice. 

You can access free, impartial and confidential support from any of the charities listed here. Each of these organisations exist to help people struggling to make ends meet, and your unique set of circumstances will be handled with empathy and respect.