ISA or Overdraft

Aesir_2

Hello,

I will be starting university in September and I'm wondering what would be best in terms of budgeting. I have opened an account with the Co-Op with a £1,400 overdraft at 0% however I have also been saving into an ISA which is almost at £5,000 earning 3.10%.

I'm wondering what would be best to use? I'm aware that in terms of interest it would be best to use my overdraft as it's interest free however I don't feel completely comfortable using up such a large amount of credit knowing that I could be paying with money I have.

Are there are pitfalls of using the overdraft that I'm overlooking? Also in your opinion what would be the better option to use for funding.

Aesir_2

I believe I should be able to manage my finances fine, although I've never had an overdraft before so I'm just unsure about using it often. I've had a Capital One Secured Card since I was 18 which I've been paying in full each month so I believe that I am fairly responsible with money so far.

I recently transferred my ISA to Nationwide before the start of the tax year to get the 3.10% rate as my rate was going to decrease with Halifax (as expected).

I'm going straight from A-Level to University and I've had no employment in between, as far as I was aware though as soon as I turned 18 that I was subject to the standard tax rate on savings? I certainly won't be earning £8,000 per year even with my Student Loan.

It's just that I'm slightly weary of any problems with my money as I've been saving into various accounts ever since I was young, Christmas money etc. has all gone into this savings that will hopefully be used on university.

Dunroamin

Aesir wrote: »

I believe I should be able to manage my finances fine, although I've never had an overdraft before so I'm just unsure about using it often. I've had a Capital One Secured Card since I was 18 which I've been paying in full each month so I believe that I am fairly responsible with money so far.

I recently transferred my ISA to Nationwide before the start of the tax year to get the 3.10% rate as my rate was going to decrease with Halifax (as expected).

I'm going straight from A-Level to University and I've had no employment in between, as far as I was aware though as soon as I turned 18 that I was subject to the standard tax rate on savings? I certainly won't be earning £8,000 per year even with my Student Loan.

It's just that I'm slightly weary of any problems with my money as I've been saving into various accounts ever since I was young, Christmas money etc. has all gone into this savings that will hopefully be used on university.

Your student loan and grant don't count as income for tax purposes.