Which to try and pay off first?

Hi, just a question if anybody can help, as I can't quite work out the right way forward:

I have two debts I am trying to pay off first as per my signature. Hopefully this month the overdraft will end at about the £1300 mark which means it will be half of what is was. We were able to pay £1k off in December, prior to that it was always pretty much maxed. The interest when the OD was £2600 was about £33 per month and I think the equivalent APR is 19.9 % or thereabouts.

We also have a credit card with £2878 on it. The minimum payment is only just over £40 on this. I paid about three times the minimim last month and paid £37 of interest! The APR is 15.9%.

I was trying to tackle the overdraft first because of the higher APR but should I now be trying to reduce the credit card instead as the interest on the OD should now be less and I'm not sure I should be paying so much interest on the credit card every month until the OD is paid off?

I hope that makes some sort of sense to somebody! :confused:

Replies

  • Hi, have to echo closed's advice and pay the highest apr first. I am in a similar situation to you and was tempted to pay off the largest debt but when I looked at it on my spreadsheet, it made financial sense to pay off the highest apr.
    One debt in 100 days £384/1264(£865 left)
    Pay all your debt off by xmas 2014 £276/18864
    NSD 4 and 4 in a row
  • sunday_girlsunday_girl Forumite
    186 Posts
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
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    Ok thanks, will keep chipping away at the overdraft in that case then! I was going to overpay the credit card a little bit again this month but I suppose I shouldn't be doing that either!
  • Oneday77Oneday77 Forumite
    1.2K Posts
    Tenth Anniversary 1,000 Posts Combo Breaker
    The practical advice is to pay off the highest APRs debt first, whether it is £50 or £50,000. In that case go with the overdraft but make sure each time you put a large lump to it lower the limit, take temptation away.
    However if it makes you feel better split the payments 80/20 in favour of the over draft, as long as 20% of available debt busting cash covers the CC. There is nothing worse than starring at debt that doesn't seem to reduce.
    The first option is the head, second the heart :)
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