# Should I pay all my overdraft off at once or gradually?

**URL:** <https://boards.straightdope.com/t/should-i-pay-all-my-overdraft-off-at-once-or-gradually/697247>\
**Category:** In My Humble Opinion\
**Created:** [September 2, 2014, 1:18pm UTC](https://boards.straightdope.com/t/should-i-pay-all-my-overdraft-off-at-once-or-gradually/697247 "2014-09-02T13:18:34Z")\
**Posts on this page:** 4\
**Page:** 2

<div class="post-metadata">

**Author:** ![Omar\_Little](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/omar_little/32/269_2.png) [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)\
**Post date:** [September 2, 2014, 11:22pm UTC](https://boards.straightdope.com/t/should-i-pay-all-my-overdraft-off-at-once-or-gradually/697247/21 "2014-09-02T23:22:49Z")

</div>

> [@don\_t\_ask](#):
>
> Nice work by the bank although I’m not sure why they want you to pay it off. If you’ve had the debt for 10 years and the account fees and interest have remained roughly the same they have already earned two and a half grand without you paying off any debt, just the vig. They could keep that up forever.

More like £3,000.

---

<div class="post-metadata">

**Author:** ![Ryan\_Liam](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ryan_liam/32/3965_2.png) [@Ryan\_Liam](https://boards.straightdope.com/u/Ryan_Liam)\
**Post date:** [September 3, 2014, 12:36am UTC](https://boards.straightdope.com/t/should-i-pay-all-my-overdraft-off-at-once-or-gradually/697247/22 "2014-09-03T00:36:12Z")

</div>

> [@Omar\_Little](#):
>
> More like £3,000.

:smack:

---

<div class="post-metadata">

**Author:** ![Grrr](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/grrr/32/146_2.png) [@Grrr](https://boards.straightdope.com/u/Grrr)\
**Post date:** [September 3, 2014, 1:35am UTC](https://boards.straightdope.com/t/should-i-pay-all-my-overdraft-off-at-once-or-gradually/697247/23 "2014-09-03T01:35:04Z")

</div>

> [@Sterling\_Archer](#):
>
> Pay it off ASAP. That interest rate is obscene.

This. In my mind, there isn’t even a debate here.

Someone upthread mentioned that it’s sometimes better to be in debt than to clear out your savings account. This might be true if you were paying a reasonable interest rate, but this doesn’t apply in your case.

Goodness! Pay that sucker off and then take those payments you were paying and build your savings account back up.

---

<div class="post-metadata">

**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\
**Post date:** [September 3, 2014, 4:21pm UTC](https://boards.straightdope.com/t/should-i-pay-all-my-overdraft-off-at-once-or-gradually/697247/24 "2014-09-03T16:21:34Z")

</div>

> [@Ryan\_Liam](#):
>
> Can someone explain to me in extreme layman terms what compound interest is all about?

You don’t even need to understand compound interest in this case. Just add up the interest you’re paying per year!

If you’re paying 25 a month on a debt of 1000, that’s 25\*12 = 300, which is 30% a year. In actuality, you’re paying _more_ than 30%, since as soon as you start paying off the debt, the principle is lower than 1000. Knowing how compound interest works lets you know exactly how much more than 30%, but it doesn’t really matter if you’re paying 31% or 33%… they’re all absolutely terrible interest rates.

[Previous page](https://boards.straightdope.com/t/should-i-pay-all-my-overdraft-off-at-once-or-gradually/697247.md?page=1)