University debt - overdraft and credit card

f1d

Hi guys,

Just wanted a quick bit of advice to see if my way of thinking is along the right lines in order to get rid of this pesky credit card.

Currently my finances are like this:

* Student overdraft - £1400 (£1700 limit)
* Credit card (about 27.9% apr) - approx £1500

Unfortunately the credit card is so high as I was living in my overdraft for most of University, and I do have a job but for several months I did not have a job so basically lived on credit card for a short while (between getting the last bit of loan to my first pay check - had to find some money to pay flat deposit and first months rent at my new place where I moved for work, which was around £1300!).

Anyway, the good news is that I currently have a permanent job that pays £25k annually... which is about £1400-1500 after tax (student loans will start coming out next April I believe).

I also need to move to a graduate account (and not Barclays, I'm with them now they are absolutely terrible).

Following the advice on the website for graduate accounts, this is my plan of action, is it any good?

Open an account at RBS and get the full £2000 overdraft to give me time to pay off my overdraft.

I was going to leave it at that... however they also offer a graduate loan at 16.5% apr - I was thinking of taking one out to pay off my credit card.

I currently pay about £100 a month on my credit card, on my loan it would be near that anyway BUT with the lower APR and I can delay payments for 4 months if required at the beginning. I would also plan to pay it off early (any big penalties if I did this/any bad reason?)

So... the plan of action (if everything goes well and accepted)...

* Open RBS graduate account, get £2000 overdraft for my existing one and slowly reduce that month by month, the 2nd/3rd year limits give me some breathing space

* See if its possible to get an approximate £2000 graduate loan to pay off credit card, pay this off monthly with the reduced APR.

* Live happily ever after?

Hopefully my circumstances will allow this, as I said I'm in permanent employment with 25k salary, although having a credit card I have never, ever missed a payment and pay more than the minimum, I have never gone over my overdraft and I have had numerous mobile phone contracts, sky, virgin and "buy now pay 12 months later" that have all had no missed payments and all been paid off (I'm 22 now).

What do you all think?

Thanks!

Edit: I also know that reading through some other threads here that compared to some people's debt issues, mine is incredibly incredibly small, please don't think I'm taking the p that is not my intention!

rdchick

Firstly, congrats on getting such a well paid job straight out of uni. I left last year am also 22 and on 15K so well done you

my words of warning
BE VERY CAREFUL.

I strolled into Halifax last year without a care in the world looking to transfer my account to a graduate one. I have a £3K overdraft from my student account, plus a £500 credit card. I come out with an Ultimate Reward Account which charged £12.50 each month PLUS a £3500 loan to pay off my overdraft and credit card - did I? No way - to me it was 'free' money. Biggest mistake I have ever made.

xxx

f1d

rdchick wrote: »

Firstly, congrats on getting such a well paid job straight out of uni. I left last year am also 22 and on 15K so well done you

my words of warning
BE VERY CAREFUL.

I strolled into Halifax last year without a care in the world looking to transfer my account to a graduate one. I have a £3K overdraft from my student account, plus a £500 credit card. I come out with an Ultimate Reward Account which charged £12.50 each month PLUS a £3500 loan to pay off my overdraft and credit card - did I? No way - to me it was 'free' money. Biggest mistake I have ever made.

xxx

Thank you! (Working in tech, seems to be where some of the money is right now hehe)

Now, I usually am kind of careful with money (I say kind of, if I was amazingly careful I wouldn't have the credit card debt!) however I do always ensure before spending any there is always enough to pay off things that are owed.

As I mentioned the main sticking point would be the loan to pay off the credit card... however I think the loan would be much better for several reasons...

* it would all go towards the credit card only, so I wouldn't be able to spend the cash
* it would be a lower APR (by about 10% if not more)
* I pay at least £100 a month off on the credit card now anyway (but end up with interest being about £30-£40) so I don't think there is any problem of the loan being paid off as I've managed to do so for the past year or two on my credit card
* by having the loan... I can't then go and spend any more on the credit card! (Infact it would be cancelled and cut up into tiny tiny pieces).

I can't really think of a much better option... unless I'm just being a bit dumb with finances and APR and everything. I thought I would ask on here before asking in the bank.

Little_Miss_Uni-Debt

I too got a graduate loan to clear my overdraft and 1 credit card at £500, it's very easy to spend on the card and dip into the overdraft if you don't have a solid budget. It ended up at £14k for me (mostly interest ontop of interest)

Can't you just cut back for a few months and pay chunks off the card instead of dragging it out for a year? You need to be debt free asap while you've got this good job.

I was made redundant from a graduate job and the banks don't want to know or help(even if you do have PPI like I had - which wasn't worth the paper it was written on). They just take whatever they please out of your current account to cover their loan and leave you penniless.

I guess it all depends on your expenses each month. You're earning good £'s now so I'd really urge you to take this opportunity, clear off the card and get rid of the overdraft all together. Don't owe anything to anyone

Banks are your friends now because you're like a shiny new graduate with a lovely credit rating.

Have you done any sums to calculate how fast you could pay your card and overdraft off if you cut back VS the cost of taking a loan?

Go to this site http://www.makesenseofcards.com/soacalc.html fill in the template and post up the results here. Then we can understand what it would cost you to keep your cards vs a loan AND you will get a budget to stick to so you don't ever need your overdraft again

Butti

I would be tempted to move the credit card on to a 0% or lifetime low APR and approach it that way. Likely to be more flexible than a loan. Do check all your options.

B

f1d

Little Miss Uni-Debit: Thanks for the advice, will sort that out when I get home and post later!

Butti: I had considered that... but am I likely to get a credit card like that? Also, if I did apply for a card (I'm thinking the Halifax 0% 22 month card) would I get the credit limit I would need (to cover the existing debt)?