Is paying off my overdraft more important than my CC?

ValHaller

YorkshireBoy wrote: »

An average of £1500 for 365 days a year?...that's circa 24% APR, so only marginally cheaper than the credit cards.

Using an overdraft, especially constantly, will be viewed more negatively (by mortgage lenders particularly) than carrying credit card debt in my opinion, because it shows an inability to manage your day-to-day/month-to-month finances.

If you still choose to pay down the credit cards, why not change banks to one with more favourable, ie debit interest-based, overdraft T&Cs?

I agree with all the above.I would suggest first dropping the overdraft to the point you are always in credit once payday has come. Yes, it will probably raise the effective APR quite substantially, but at least you will be regularly in credit - and you will be less vulnerable to the bank calling in your overdraft. If this happens, I would say that as you are, you are likely to collect defaults which is not where you want to be!!! And yes, it does happen.

And to guard yourselves a little more, do have a contingency plan for how to get by if the overdraft is called in - no, not payday loans. I doubt you would get by until your max overdraft was quite a lot less than a months pay. Continue reducing the overdraft to this level.

Conventional wisdom is to pay down the highest APR first - and you can decrease the apparent APR of the overdraft on the £1/day tariff by keeping the overdraft high. I used to think this way, but now I believe that the first debt to be tackled is the overdraft because of the near certainty of defaults if it is called in.

CupcakeLisa

YorkshireBoy wrote: »

An average of £1500 for 365 days a year?...that's circa 24% APR, so only marginally cheaper than the credit cards.

Using an overdraft, especially constantly, will be viewed more negatively (by mortgage lenders particularly) than carrying credit card debt in my opinion, because it shows an inability to manage your day-to-day/month-to-month finances.

If you still choose to pay down the credit cards, why not change banks to one with more favourable, ie debit interest-based, overdraft T&Cs?

Thanks. It was if lenders looked badly on overdraft more than CC infor that I really needed.

I really should have asked that clearly but have a million things in my head.

I will clear the OD first.

CupcakeLisa

So you would advise getting rid of the OD not just clearing it?

I have a small OD on another account that I have, I never use it. Should I get rid of it?

I have cleared my debts CC first as it saved me money on interest but I wasnt really thinking of the long term implications. All change from today

ValHaller

Keep the facility and don't use it.

CupcakeLisa

Thanks, thats been really helpful

Foxy-Stoat_3

Can you not get another credit card and do a zero percent balance transfer and low interest money transfer to clear your OD and CC together? Barclarycard are doing good deals at the moment.

Once you have zero'd the OD and CC I would cancel them both and just one monthly low/zero interest payment.

CupcakeLisa

Foxy-Stoat wrote: »

Can you not get another credit card and do a zero percent balance transfer and low interest money transfer to clear your OD and CC together? Barclarycard are doing good deals at the moment.

Once you have zero'd the OD and CC I would cancel them both and just one monthly low/zero interest payment.

No I have a default that I am waiting to fall off early next year so my credit doesnt look great at the moment.

Once that is off I will look at a 0%

Miss_Marple_2

CupcakeLisa wrote: »

Thanks. It was if lenders looked badly on overdraft more than CC infor that I really needed.

I really should have asked that clearly but have a million things in my head.

I will clear the OD first.

Lenders will ask for bank statements for ( in my case) the last 3 months. I know users on here that have been asked for more than that ( and some less). If you were totally in overdraft for all of that time, this would not look good.

I'm a FTB, like you, so this may not count for much, but my advice would be to pay just over the minimum on your cards and clear as much of the OD as you can each month.