Taking Back Control of Your Finances
We know how hard it is, when you feel that there is no stopping the flow, the banks are relentless. They bounce a direct debit, charge you for it, then the money you had coming in is swallowed up by the charges, and more payments bounce. And there's so many charges that you can never catch up, and you are sinking further into debt. Sounds familiar?
There are however steps to make it stop, at least temporarily, and start regaining control.
First of all, you should have another account. Then, cancel your direct debits on your existing account. But don't start new d/d on your other account. D/d gives them the right to help themselves to your money, however much they want, when they want, it gives them all the power, and you none of the advantage.
Before you do all that follows, make sure that your incoming money gets transferred to your new bank from now on. If it's benefits, tell DWP asap. If it's wages, tell your payroll people asap.
Set up Standing Orders instead. They work in the same way, except that you call the shots. YOU say when, YOU say how much. Combined with Internet Banking, s/o are the most powerful way to get control of your finances, IMO.
Then, this is what you need to do, if you haven't yet. You need an accounts book, just a plain old lined A4 Poundland jobbie will do. From now on, it will be your bible.
I am going to work on the assumption that you have Internet Banking, if you don't, set it up asap, on both accounts.
Either way, you need to get a bill for every one of your d/ds. Some companies are already clued on the internet thing and at the back, will give you the details on how to set up online payments. Those who don't, you'll need the payment slip, it has a sort code and an account number, that's what you need to set up online payment, with your own reference number. Sort out the amounts and dates so that they coincide with your incoming money, paying attention to due dates on credit cards and so on.
Some companies say they only do D/D and can't accept a S/O. Find a bill and do a S/O anyway - if it's a new product and they'll only accept a DD or they won't give you the product without DD, set it up to get the product, then cancel it and turn it to a S/O*.
- WARNING: Some companies charge you a fee for not paying by D/D. These can, and have been, successfully challenged and paid back (see in the Telecoms forum), but you have to weigh up the pros and cons in this instance. However, remember that "saving" £5 a month by paying by D/D could end up costing you £30 + if it takes you over your limit, or pays itself before your money clears in your account.
Write down in your book all the reference numbers, sort codes and account numbers, in case you ever need them again.
Once it's all set up, cancel the d/ds with your first bank. Contact the relevant companies like insurances and so on to tell them that you are changing banks, and that normal service will be resumed as soon as possible. On things like electricity, gas, insurances and so on, they are usually quite flexible on the payment dates, so you can change the payment date to one that suits you better, make sure you tell them when you phone them.
You have now taken the first step to take control of your finances. You will have to monitor it daily, and you will have to learn to juggle around, but it can be done. I am not good with numbers, but if I can do it, anyone can.
Now both your income and outgoings are going through your new bank, you are left, presumably, with a previous bank overdraft. That's ok, that can be dealt with too. You need to work out how much of it is made of charges, how much is it you would actually owe if it wasn't for the charges, and take it from there. Remember, once they no longer have first access to your money, they can add all the charges they want, it is no longer a major issue.
If the bank tells you to repay the overdraft in full, don't panic.
Work out how much you can repay per week/month without leaving you in financial dire straits. Write to the bank telling them that you can not possibly repay the o/d in one go, and that you will pay back £xx per wk/mth/4 wks/whatever until o/d is cleared. Enclose 1st payment in letter. If they cash the cheque, it will be all the harder for them, in the case of future argument, to explain why, if they didn't accept the agreement, they cashed the cheque. You need to say in your letter that this is the best you can do, and if they are not happy with it, they can and should take you to court and ask a judge to decide what and how much you should repay. Oh, and demand that they freeze interest onto the debt until it is paid off. (they probably won't, but it is aways worth a try)
Here's the news: The bank doesn't want to go to court on that either, for the following reasons:
a) Like the rest of us, they have a duty to mediate outside the court system. If you have made a reasonable offer, a judge will not take kindly to them litigating.
b) Depending on what you offered to repay and what your existing debts are, a judge could well decide to award them LESS than what you have offered to repay in the first instance. Because a bank o/d is not a "necessary" debt, it is at the bottom of expenditure, and before a judge decides how much you should repay the bank, he'll look at all your other outgoings, mortgage, food, electricity and so on... Then, on a sliding scale of importance, until it gets to the overdraft... And since you had made an offer of repayment as it is, and kept to it, he is not going to put the bank very high in the order of priority. And the bank knows this.
The 3 important things to remember are these: Enclose 1st payment with your proposal. Keep up the payments. Don't budge once you have made your proposal, no matter what they say.
In all likelihood, when you win your charges back, they will pay them against the o/draft. Fair enough. Think of it as one less debt hanging around your neck on the way to financial recovery.