Credit Card Vs Overdraft

bandraoi

I started a new job in (late) September, having finished a Masters last year.

Between moving house (deposit), new clothes for work, and getting paid monthly, I essentially built up a months pay check worth on 2 credit cards.

I'm normally quite good with money, I hate being in debt. Until now my credit card has always been on 100% direct debit, I'm usually the sort of person who checks my bank balance daily.

After Christmas I realised the amount on the card coming down at all, so I've cut out the clothes shopping and reduced the lunch etc. spending. I'm aiming for about £200 a month. There's only about £700 left on one card, and the second card is a) lower and b) should be cleared by an old savings account once the paperwork is completed.

I had intended to move it to 0% credit cards but I applied to two and got rejected. (probably lack of credit history/permanent job showing up)

I've just noticed (online) that my bank account has pre-approved me for an overdraft which is more than what's left on the credit card.

Would it make sense to move the credit card to my overdraft?
That would leave the entire debt paid off for a portion of the month, and what remains at a slightly lower interest rate (I think, need to check at home).

Financially it should save me money. I'm just hesitating a little, because I'm betting on trusting myself.

lynsayjane

it's a tough one. if you will be paying less interest until it's repayed and you WILL cancel all the cards once they are clear then perhaps the overdraft is the best way to go. if you can still aim for £200 paid off each month then on payday call the bank and reduce your od by that amount then budget to allow yourself treats as well as necessities and stick to it. that way your getting your debt totally cleared.

sammiboo

i personally wouldnt go for an overdraft, i would rather pay it off the card as i think you can forget that an overdraft isnt your money.

thats just my opinion though, i am not saying its financially correct way to go.

bandraoi

I said !!!! it and did it.
I've been leaving my credit card at home for the last month, so I think I'm unlikely to build up a new balance. I find the overdraft more visible anyway because I check the balance on my account online.

Fingers crossed this goes ok.

bandraoi

Shoulda kept them crossed.

Did the increase in overdraft. It was automatically approved and showed up as an increased balance available on my online account, so I made the transfer.

Got a lovely letter to my account today telling me that they had bounced the payment and it would be costing me £39. So they mess up by telling me they've approved an overdraft I don't have and then charge me for the priviledge.

So I've just rang them, got them to cancel the charge. The lovely lady told me it was a goodwill gesture and that if it happens again they won't be able to do that.

So lovely of them to promise to charge me for their stuff ups the next time it happens.

Can I scream now?

bandraoi

Well I redid the overdraft increase, left it a good two weeks till it showed up properly and stayed. It has, so today I transferred the money to pay my credit card off.

I'm at about -£400, pay day is the 27th, but I've about £110 of expenses due to me before then. If I really wanted to, I could probably manage on about £30 till then, but realisitically it'll be about £150.

Since starting this thread I've also
1) talked to HR and finally gotten myself taken off the basic rate of tax (I think) so that should result in an increase in salary coming to me.
2) gotten a promotion that will also increase the amount in my monthly pay packet.
These should both go through this pay, but I won't hold my breath.

Now I must chase the paperwork on the old account, and my Dad, who hasn't yet lodged money to my account at home, which I need to pay off a bit of that credit card in the mean time.

bandraoi

Number Crunching update:
Well tomorrow is payday.

Credit card was originally -£750.90, of which £115.15 was expenses.
(so £635.75)
Account is currently at -£472.76, of which £14 is expenses (so -£458.76)

so £176.99 paid off, in addition I made a £100 payment just after I got paid last month, so I've actually paid off £276.99.

The only balance on the credit card is currently about £140, however this is all work expenses, and the claim has been submitted.

If my tax band has been sorted, I should have £380 to live on after bills next month. It's a five weekend month which is going to stretch things, but I'm going to aim to last as long as possible without going into the overdraft.

bandraoi

Well my salary went in and it was more than I thought it would be.
Got my payslip today so now I can work out what's happened.

1) My tax has been fixed - woohoo!
2) I got a promotion last month, which HR took ages to process but I complained and they must have put it through after the payroll closed.

Now for the possibly extra good news.

My salary is a base salary + a london allowance (£1000).

They told me they had increased my salary.

I assumed that my new base salary + london allowance = the figure they gave me.
Looking at my pay check though, the new figure is my base salary.

Instead of a £1500 pa salary increase, I have a £2500 pa salary increase.

In other financial news, I've posted my P60 back to the tax office, so that chunk of money (about £1600) is at least being processed.

I've also contacted Carphone Warehouse, gotten the address, and as soon as the bill arrives I'll be able to claim my half back offer money. (I think it's £70)

slowlyfading

Looking good! you feeling better now about things? Do you keep a spending diary as well, just to see where you overspend on some things?
SF :heartpuls

bandraoi

slowlyfading wrote: »

Looking good! you feeling better now about things? Do you keep a spending diary as well, just to see where you overspend on some things?
SF :heartpuls

Well there is nothing like almost £300 extra in your pay check to make you feel more cheerful about things.

I must admit, that heretical though it is, I don't keep a spending diary.
There's only me, and I only have three bills.
- My rent is about a third of my salary and it includes all the council tax and bills.
- My travel card which is £90 a month though I think I'm going to buy a bike next month instead.
- My phone which is £35 at half back + about £5 in call charges.

After that it all goes on food/drink/clothes and holidays.
Yes financially that may not be the wisest, but I'm 25 and I live in London. I don't plan to live here forever and I'd like to take advantage of it while I can, (without running up debt)

I take what I have left and divide it by the number of weeks + the number of weekends in the month, and that's my guideline figure of spending money. It works for me.

bandraoi

Well pay day is here again.

Yesterday I had the following:
- overdraft of £300 on my current account
- £200 on my credit card (all purchases in the last month so no interest)

The overdraft is because I've sent £300 to pay off my Irish credit card. This money is still floating around in the ether for various reasons, however once it gets there that card is paid off in full. (I have used some savings also, but I will replace these)

The credit card was a strategic decision at the start of the month to put some spending on it and take advantage of the 30day you get interest free. I'll set it up to pay off in full as soon as the bill comes.

So overall I spent £580 this month, which isn't bad given that it was a 35 day/5 weekend month. I also did a fairly big stocking up of food and toiletries.

On other fronts, I've claimed my cashback on my phone and I've had the texts to confirm it's going through so that's £80 that's due shortly. I've also written to the tax office so hopefully my tax will be back shortly.

I've worked out that I should have enough money to last me till the end of the month with no overdraft, though I may put my travelcard on my credit card to give myself some breathing room.

so basically I'm debt free