Should I pay off my CC with my overdraft?

hiraldo81

Hi all,

I am a novice to this site and this is my first post so I'm not sure if this subject has been discussed in detail. I would be really greatful for any help on this.

I have read the advice on this website regarding paying off my credit card with my overdraft. The advice is to avoid it at all costs as normally the interest rate can be higher on an overdraft agreement than on a credit card.

This is my current prediciment;

Current credit card balance (Halifax One) - £3498.33
Current credit limit - £3600
Interest Rate 29.9% APR

Current Overdraft balance (Halifax Ulitimate Reward Account) - £0
Current overdraft availabity/agreement - £1700

Agreed Overdraft charges;
Up to and including £300 - £0
Between £300.01 - £2500 - £1 per day
Over £2500 - £2 per day
Use an unarranged overdraft - £5 per day

I am contemplating asking the bank if I can increase my overdraft limit to £3500 and pay off my credit card in one lump sum.

On face value is seems as though this works out more cost effective as the overdaft fees seem less than 29.9% APR.

At the moment I am paying £105 per month as a minimum monthly payment but this is just paying the interest. Having a daily charge on my overdraft for the amount I need would amount to 31 days x £2 = £62 month.

Is it a good idea to extend my overdraft and pay off my credit card this way?

I feel I am missing some important details, please help!

Thanks in advance

Hiraldo81

pinkarsenalprincess

Why don't you switch to another card with a 0% balance transfer deal? Paying off a credit card with an overdraft seems like a bonkers thing to do to me!

YorkshireBoy

The O/D will cost you the equivalent of 1.8% per month...representing a saving (but only on 50% of your credit card debt) of around 25% on the circa 2.5% per month you're currently being charged on the credit card.

However, are you aware that any O/D usage is repayable on demand? What will you do in the following scenario?...

Pay £1,700 off your credit card
Card credit limit is cut by £1,700 (as is often the case reported on here)
Overdraft is called in

An APR of 29.9% would indicate your credit rating isn't the best? Is that what's stopping you applying for another card (ideally 0% or a good LOB rate) and balance transferring the debt elsewhere?

hiraldo81

Thanks for your responses.

Yorkshireboy - that is a very good point regarding the scenario with credit limit being cut and the overdraft called in! I would be in a difficult position then.

Yes my credit rating isn't great due to my time as a student a few years ago - very silly with money at the time!

I have applied for a 0% balance transfer and looked at good card deals in the last 6 months and they were declined.

I am trying to imrove my credit score by registering on the electoral role and monitoring my credit report etc but I am limited, this is gonna take time.

Do you think it is likely that if I went ahead with this they would cut my limit and demand for overdraft to be paid?

I am not sure what other options I have?? - at the moment I am not paying any of my credit card off - just interest.

pinkarsenalprincess

Have you looked at your finance thoroughly? Is there anything that you can reduce/cut back on to enable you to make more payments to the CC?

hiraldo81

I have recently looked at my finances using the tools on this website and I have now done a budget plan. I will be planning to try and pay more off on my cc each month. Just feels as though I am not making a dent on the actual debt, just the interest!

Do you think I should try and improve my credit score and apply for a 0% balance transfer with a decent rate?

Thanks in advance