Pay off the Overdraft or Credit Cards first?

frazyoussef

Just wondering if I should try and clear my credit cards off as opposed to getting out of my overdraft first to help increase my credit score?

I have a £1200 overdraft that I almost always use and have two credit cards with a limit of £1200 (Balance: £1050) and £200 (Balance: £150).

By payday I nearly always reach the -£1000 mark but the last couple of months I've made the concious effort to spend less and get out of this as im looking to tidy both my current account up and my credit reports. But after doing some reading it turns out that maybe I should be paying off the credit cards quicker and freeing up the available credit then sorting out my current account.

I pay £50 a month off the £200 Capital One card and £150 from the Barclaycard (£1200) but should I be paying more off in particular the Barclaycard?

Any advise would be welcome, thanks!

Herzlos

How much does the overdraft cost you?

I tried to get out of mine before the cards, because the penalties were pretty steep (£1/day and now £6/month + interest). But then I was generally only into the O/D by a couple of hundred.

Pay money onto the most expensive one first, as it'll save you more money in the long run.

frazyoussef

It costs me roughly £20 a month for the overdraft as a fee from Santander.

But you recommend paying the cards off first? Maybe ill try offsetting more of my pay to the cards. I always thought that keeping more credit available on my bank account than the cards would be more beneficial in terms of my credit score.

Thanks for your help.

rolls99

Your Capital One card is as well having nothing on it.

You owe £150 - if you can squeeze this out, then you will have some residual interest next month but more importantly, the £50 you pay to it for you Barclaycard or the Overdraft, which is then raw numbers.

I would say clear off the Capital one - no point running a balance on such a small amount which is still nearly the entire limit.

Then, only use it for petrol or something - clear it off each month and you'll get green ticks, then concentrate on the BC/OD

YorkshireBoy

Ordinarily I'd say pay off your overdraft before credit cards, as that would do more for your credit rating (constantly using your overdraft facility tells anyone searching your file that you can't manage your day-to-day finances properly, whereas using a credit card is seen as spreading the cost of high value one-off purchases).

However, with Santander the "in for a penny in for a pound" saying springs to mind. Because you're paying a flat fee per day, no matter how far in you are, you may as well pay off the credit cards and leave the overdraft for now.

Just a thought for you to ponder...what would you do if Santander called in the overdraft facility when it's next reviewed?

frazyoussef

I'd have enough to pay the bills but we'd be eating beans on toast for the foreseeable future. Its a situation im not proud of but have identified that I need to curb the reckless spending and start watching the money grow.

Im inclined to review my current plan of clearing my OD by December and start paying more off the cards. By the sounds of things that seems to be what the comments are suggesting.

Thanks for your comments I will take them on board as I do with everyone that takes the time to reply.

rolls99

Sounds reasonable enough.

'Snowball' the small card, and good luck with the rest!

ValHaller

I used to think highest APR first. But now I think overdraft first. The terms and conditions of an overdraft allow it to be recalled instantly, so if you are dependant upon it you are very vulnerable to being pushed into defaulting.

The aim should be to make sure you are at least £1 in credit by payday and use the overdraft to cover navigation errors in the monthly budget. Once you have done that. start attacking other credit, normally highest APR first.