Overdraft or Credit Card??

atwarwiththemystics

Hi everyone,

I have a bit of a conundrum regarding the £750 debt I seem to have accrued whilst being unemployed, which I'm now trying to clear, now that I'm working again.

I've somehow managed to get a job working for a bank, but I'm still pretty clueless about how to deal with my debt.

The £750 debt built up in the overdraft of my Lloyds Graduate Account which I'd had since 2005. However, this week I have received a letter from them stating that my Graduate Account will be converted to a Classic Account in August, and that standard overdraft fees for a Classic Account would now apply.

Although the letter didn't state these fees, I'm assuming they'll be pretty high, so I've transferred the £750 debt to my new staff bank account with HSBC, which has an EAR of 1.5%, which I've been told is really good.

However, I've also just opened a staff credit card with HSBC, which has an EAR of 0.0% for Balance Transfers completed within 30 days of the account opening, for the first 15 months.

My question is, do I keep the debt in an overdraft and let it accrue the interest there, or shift it onto my credit card and pay it off month by month? Also, will either affect my credit rating?

Any help would be greatly appreciated. Thanks for reading!

bottleofred

You should always go for the lowest cost option, but only if you can afford to pay off the overdraft before interest kicks in. If there is a fee for transferring the balance you should also take this into account.

atwarwiththemystics

Thanks for the reply. My feeling was that as the overdraft was only 1.5% interest (EAR) I'd be able to pay it off gradually over the next year, as the interest seems quite small. Is this correct?