Focus on: Clear debt with Nationwide FlexDirect

According to the latest figures from the British Bankers’ Association (BBA), the nation owed a collective £7,741m in overdrafts in August this year – that’s a hell of a lot of cash being paid out in interest and charges. 

But if you are among the millions of people who live in the red with their current account, now’s the time to make a change. We take a look at how Nationwide’s FlexDirect current account can help clear your debt – and give you something back at the same time.

What’s the deal?

The FlexDirect current account from Nationwide Building Society offers 0% interest on your overdraft for the first 12 months of opening the account. After that, you will be charged at 50p a day – so long as the overdraft has been prior agreed. Unarranged overdraft costs are much higher at 50p a day on balances up to £10, and £5 a day on borrowing beyond that threshold. Charges are, however, capped at £60 a month.

The account is equally generous for the first year for those in credit too, paying an annual equivalent rate (AER) of 5.00% on balances of up to £2,500, dropping to 1.00% thereafter. In either case you will need to pay in at least £1,000 a month to qualify.

Who’s it good for?

The FlexDirect account will suit anyone who has been trying to clear their overdraft but has been unsuccessful due to having to fork out interest and one-off fees. By switching bank accounts to Nationwide, you will be given a 12-month reprieve to pay down the capital debt and start afresh.

Switching current accounts is also now a lot easier than it was. New rules introduced by the Payments Council on September 16 provide consumers with a guarantee that all payments will be transferred without a hitch – and in seven working days. You can find out much more in our 7-Day Switch hub.

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Any catches?

While, in theory, you can transfer your overdraft to a new bank, as with other kind of borrowing, it will have to be approved. And your chances of acceptance will depend on your credit score and how well you’ve managed your previous bank account. Bear in mind that if the new bank will accept your overdraft, it might not agree the full amount.

When the interest-free overdraft ends on the FlexDirect account, charges suddenly become expensive, so be sure you can pay it off in a year.

What’s the verdict?

Nationwide's FlexDirect is a great account if you have a debt clearance plan that you are going to stick to. And if you hit a credit balance after the first 12 months, you will at least benefit from earning 1.00% interest on it.

However, if you have a relatively small overdraft, there may be better current account options over the longer term. First Direct’s 1st Account for example, offers 0% on the first £250 you are overdrawn by for an indefinite period. And if you do creep over this threshold, the charge is a relatively competitive 15.9% EAR.

What’s more, if you make the switch via the new Current Account Switch Service, which means closing your old account down, First Direct will pay you £125 cashback for your trouble.

Alternatively, Santander’s 123 current account offers the first four months interest-free on whatever level of overdraft is agreed. After the four months, you’ll be charged £1 a day, capped at 20 days in each month. However, this is more of a current account for those in credit as it pays cashback and interest at denominations of 1, 2 and 3%. But you will need to pay in at least £500 a month and pay a £2 monthly fee. Read more about the 123 account and others with my article, The best banks to switch to in 7 days.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct

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