overdraft Vs Credit Card

falldown7timesgetup8

Evening all

On friday, i am paying off the final amount owing on my first natwest CC (APR 22.9%) :j :j:j:j:j

I have then got a further £500 to put towards the first of the payments to EITHER clear the second card (APR 17.94%) and the overdraft (APR 16.9%)

To date, I have been snowballing, so in theory the next debt to be dealt with is the overdraft, BUT....

I want to keep the overdraft "available" as an absolute last ditch emergency fund/buffer for the future (when its paid off, rather than reducing it with the bank if that makes sense) ....and as a result, I am a little concerned that i might start paying it off...but then "dip" back into the part ive paid off without really realising, and then fall flat on my face with getting DF.

Im also concerned because it is the largest of the three debts - so i guess paying this off could either be a massive demotivator (as it takes the longest) OR be the total opposite?

I know the obvious is to say - "doh - just dont spend it"...but Can anyone offer any advice or "been there" experience?
Please be nice!
:beer:

Heffi1

Your overdraft would be the first thing I would get rid of, it is the one they can recall whenever they like, so the lower it is the better I think.

falldown7timesgetup8

Thanks Heffi1 - Can i ask what you mean about recalling it?

Tixy

If you are snowballing then the next debt to pay off would be the card at 17.9% - as it has the higher APR - not the overdraft. (if the overdraft its still your main bank account and is sometimes in the black then its costing you less than the APR suggests).

But some do prefer to pay off an overdraft, due to the fact it can be recalled (they can take the overdraft away from you at any point in time).

falldown7timesgetup8

ahhh thanks Tixy - I hadnt considered that. The overdraft is never in the black though. (one day!!) At the end of the month i will be paid approx £2200, and out of this, will have about £1000 this month left after bills etc from the 1st onwards. (when all of my bills leave my account) £200 of this is for food and "fun money" which leaves the £800 for debt repayment. USUALLY i have transferred all spare money to whichever CC im paying off....

So essentially, once the last £300 is paid on the first CC, I would have £500 £available" (£3000 in the red for the whole month) if i leave it in the current account?
OR i can use the £500 to pay the second CC.

Did that make any sense at all?

falldown7timesgetup8

I should also add - if i paid the second CC first, I could have this cleared by Xmas? Would mean paying SLIGHTLY more than I intended to per month, but could be a nice motivator to get both CC's clear by xmas and start the new year with just the overdraft?

Tixy

Sounds good to target paying off the card by xmas - providing you don't then decide to buy extra xmas presents on the newly cleared cards.

Good luck.

falldown7timesgetup8

NAHHHH - no one is getting anything this year - im gonna be the grinch!

Only kidding - xmas pressies are already budgeted for
Thanks so much x

Heffi1

Tixy answered it above, but if the bank decides to withdraw your overdraft it would have to be paid back in total straight away, that is the only reason I would pay it back first, but if you could clear the CC by Christmas then use the snowball method to get rid of the overdraft early into the new year with those payments.

I know what you mean about Christmas, I have cancelled it this year ha ha lucky my kids know what a mess I am in with regards to finances (and they are adults now) so it is not so much of an issue as it might have been if they were little still.

falldown7timesgetup8

Thanks Heffi1...

I get that it could be an issue if the bank recall the overdraft, however according to my budget/snowball/obsessing about money...unless some hideous drama occurs, I should have the overdraft paid off by the end of March.... and i will be debt free!! :j:j:j:j:j:j:j:j:j:j:j:j:j

Ive held the overdraft facility for about 8 years now, so I figure the chances of them removing it by March are remote, given that a healthy amount of money is paid into that account each month?

Any thoughts?

ps - everyone is so helpful on here! Thank you SO much

I_will_win

Hi
Well done on your efforts so far, I would split the payment between card and overdraft, cut the overdraft limit as you go along, the temptation will be to much, the bank will see you are paying it off and wont call it in. All in all still be debt free.