Overdraft, credit cards, loans.

darren_5

Hi

I have an arranged overdraft of £1000 and also have a credit card and loan.

Can I use my overdraft to pay off my credit card to try and reduce the interest? Does being in your arranged overdraft go against you in your credit report or anything?

Darren

ChrisEvanson

You simply withdraw the money and pay it off your credit card, or write a cheque to do the same. Can't see why you think you can't? Using an arranged overdraft shouldn't affect your credit rating, no.

Moneymash

How much will the overdraft cost you and how will you get out of it?

Poosmate

No problem doing that but obvioulsy make sure the interest charged on your overdraft is less than your credit card. I would suggest you don't go too close to your overdraft limit either, you don't want the interest added to it to take you over the limit and incur charges as that would defeat the object.

Good luck and hopefully if you can pay a chunk off your credit card they may offer you a 0% deal some time in the future and you can pay your overdraft back on to your new deal.

Poo

scattydove

I'd do the following things:

a) Make sure that the interest on your overdraft is less than the interest on your cc
b) Make sure that you won't exceed your overdraft limit if you do go into it. That WILL affect your credit score. Plus you'll most likely incur charges
c) If you pay off your cc either cancel the account or reduce the limit to ensure you don't build up the same amount of debt again

Good luck

SD

fozmcfc

One thing to be cautious about is that overdrafts are repayable on demand, minimal or no notice is usually given by the bank, whereas you can pay back credit cards at the minimum amount for years and even reject APR increases.

So yes it is a good idea if the interest on being in an overdraft is less than the credit card. But you need to start to adjust your spending to also start getting the overdraft down, so if you need to repay it, you can do so as quickly as possible.

As for looking bad, well being constantly in an overdraft, looks like you are spending more than your income, so it won't look good.

Ultimately the only way to reduce the amount of interest being paid, is to spend less or earn more than you spend and start to reduce balances. If you are finding it difficult, then you could post up a SOA (statement of affairs) on the forums and forum member can take a look and make suggestions. Many have and many are or are on their way to being debt free.