Overdrafts

Hi

I currently have an overdraft of 3.5K. Every month my salary clears it but with outgoings and savings I end up going up to my overdraft limit. I have 4K in savings. I'm clearly living beyond my means and I want to change that but should I just use all my savings to clear the overdraft and cancel it, but have nothing in savings or should I reduce my outgoings and gradully clear the overdraft, but keep my savings up.

Really don't know the best option. Would be appreciate any advise.

Thanks

This is a no-brainer. Use the savings to clear the overdraft, as that is costing you much more than any interest you ar getting on the savings. However, you must ask yourself why you needed an overdraft in the first place? Was it a particularly bad period a while back or do you overspend normally on a week to week basis?

Originally got the over draft to clear my credit card, as I clear all of it every month and thought I was being clever about it, but now it is just out of control, so my plan is to clear the overdraft and get rid of the credit card, but I was a little apprehensive of clearing my savings and starting from scratch.

The correct thing to do is to clear the overdraft: You will be paying interest on it, and you will also be forking out a yearly fee to maintain to overdraft also.(ie it costs you more money to have the overdraft in costs, than you would earn in deposit savings on your money)
You're better to get rid of the overdraft if at all possible.
Having an overdraft also can be an encouragement to live beyond your means.

Nicola

It is worth remembering that if you close your overdraft and stop the facility you will get hit with charges if a standing order hits your account and there isn't the funds to cover it. Also, if the bank processes the standing order you will have an unauthorised overdraft and on which the interst will be charged at the regular overdraft plus the surcharge rate which depending on which bank you are with could be as high as 27%.

This is true: However, the annual overdraft fee can be steep enough: eg €25 per annum if you bank with BOI, €25.39 with AIB.
With other banks there may not be any overdraft fees (bar the interest on the actual overdraft).
So you need to weigh up (if your bank charges an annual overdraft fee) if you think it is cost effective to you to pay this fee, versus keeping an eye on your account and maintaining it in credit, and being aware of your incomings/outgoings to avoid going into the red.
Nicola

Thanks all for the advise, I think I will just clear it and get rid of it and start living within budget!