Credit Card or Overdraft

JamesBro

First of all, sorry for posting a question that has probably been asked a thousand times before.

I'm self employed and in a position where I have a lot to pay for over the next few months.

I am paying my tax 'on account', am going backpacking across Europe in July and to Las Vegas in September.

I need to give myself a little bit of a cushion to be able to afford all these at once, but I'm a pondering whether to increase my overdraft facility by 50% of what it already is, or apply for a credit card.

I had a meeting with my bank (RBS) today and they said that getting a credit card would be my best option. The thought of a credit card does worry me slightly though.

I already have an overdraft and I have paid about £17 interest on it in the last 12 months, so it's not exactly hampering me. If I increase it by 50%, would the interest go up to about £25 for the year? If so, it seems safe to just increase my overdraft.

I'm a bit stuck between the two though and any help would be much appreciated.

Thanks.

James.

Dean2013

I also agree that a credit card would be a better option!

An overdraft is best used for emergencies, for example, if you have a higher than expected bill and need a bit longer to repay it.

If you want to borrow more or over a longer period then you could be better off with a different kind of credit

zerog

Why are you worried about having a credit card, but not worried about the fact that you're going on a holiday you can't afford?

geekonthepc

I agree with other opinions - a credit card would be a far better choice. I have an overdraft and credit card myself, but my overdraft is only there for real emergencies and I wouldn't use it lightly. It's mainly there just in case my pay cheque is lower than normal one month - as it is quite unpredictable.

On the other hand, I'm much happier to spread the cost of things with a credit card. You get far better protection on messed up purchases with a credit card, plus I personally much prefer leaving my monthly non-essential spending to one monthly payment (I pay my CC off in full every month but pretty much put everything other than monthly bills on it - I find it makes it very easy to compare my spending each month).

SuperSaver123

From your other posts I can see you are also thinking about mortgage. Overdraft is not a good indicator for lenders and this could potentially make your mortgage application very difficult.

chrisw99

Don't forget an overdraft can be "called in" by the bank without warning, and you find yourself having 14 days or so to get yourself back above £0. (it's happened a few times on this forum although to be fair it's quite rare)


And you may be able to get a credit card with a 0% purchases deal (Tesco do one 0% for 19 months) so you wouldn't be paying any interest at all