Paying full balance each month then living off card?

~Jem~

Hiya, can anybody tell me if this makes any sense to do this.

I currently have an overdraft of £400, which, by the end of the month i will have practically used up. But i only pay around £1.20 a month or something small like that.

I have 2 cards, one of which has ridiculous interest (over 30% apr)

Next time i get paid (about £650) should i pay off the balance of my card in full (about £400) then use up my overdraft, THEN use my credit card, although obviously not use for cash withdrawals as they charge £3 everytime.

I know im likely to only lower my credit card balance a little each month, but if i only need to use it for 2 weeks out of 4 say, would this help lower the interest charges?

And if i cut back and spend less this would also lower it surely?

Just wondering if anyone else had tried this??

sdooley

You will need to be very careful you don't max out your overdraft and your credit card...

In theory there will be a slight advantage here as the overdraft presumably comes with a slightly lower interest rate than the credit card. Bear in mind that you will be charged interest for the first month up until the date you repay the credit card balance but thereafter, if you pay off you card balance in full there should be no charge.

I'm just worried a miscalculated standing order will come out and you'll end up with bank charges. Also an overdraft is an "on demand" lending facility - intended for occasional, temporary, overspending - if the bank see you are always in your overdraft they would be within their rights to ask you to repay it in full at any time.

Have you considered balance transferring your credit card debt to a 0% card or low rate card then paying it off bit by bit? Seems safer than using the overdraft too much.

~Jem~

I cant get any more credit cards, have tried, definately wouldnt be able to get one with a decent interest rate.
My bank have said i have my overdraft til june next year, but could they still ask for it to be repaid? Im thinking of trying it next month and see how i go.

Also slightly worried with my bank as my debit card expires at the end of the month and not recieved a new one yet!

NickX

sdooley wrote: »

Also an overdraft is an "on demand" lending facility - intended for occasional, temporary, overspending - if the bank see you are always in your overdraft they would be within their rights to ask you to repay it in full at any time.

Well this is true, but the Banks only really demand repayment of an overdraft if they smell "financial difficulties" and want their money back before bankruptcy or IVA's start.

I have been overdrawn to the limit for sustained periods of time without problem.

But, do not exceed your agreed overdraft limit, that is when it gets expensive.

Richard019

NickX wrote: »

Well this is true, but the Banks only really demand repayment of an overdraft if they smell "financial difficulties" and want their money back before bankruptcy or IVA's start.

I have been overdrawn to the limit for sustained periods of time without problem.

But, do not exceed your agreed overdraft limit, that is when it gets expensive.

As a further example (perhaps even more extreme):

When I got my student account it was being used as my main one and I built the overdraft up to as close to the limit as I could (money in savings). When I moved my main account at the start of the year I didn't use the switching service and did it manually.

I left the £1k interest free part of my overdraft maxed, although there was another £700 available at some high rate. The account sat there for 5 or 6 months with no activity what so ever and nothing was said, the only reduction to it came in April when I asked them to remove the extra £700 as I couldn't make any money out of it (being a cheeky northerner I even told them that).

The only activity it's had has been a payment into it of £500 in June/July to cover a drop in my interest free limit due to how long I've been out of uni). Interestingly I've just realised I've not actually had the letter telling me that it's been reduced like I did last year.