Obtain credit card to help bring overdraft down?

stevobreen73

Im looking for some advice. I currently have an overdraft of about £2000 which is slowly reducing each month ( by approx £300-£400) My overdraft fees are about £25 per month.

I have a holiday to pay for in March in the region of £2000 and also a settee in August for about £1300 so the overdraft will increase again.

I'm considering obtaining a 0% credit card to pay for the holiday and settee which will mean the overdraft will clear fairly quickly and therefore the fees will cease.

I don't intend to use the credit card for anything else apart from the above. The intention is to pay a set amount each month and clear the outstanding debt before the 0% expires.

Does this sound like a sensible idea? I've never had a credit card before so would appreciate some advice.

YorkshireBoy

No offence, but it appears you're living beyond your means.


If you've never had a credit card before you may find it difficult to get one with a sufficient limit to cover your needs wants.


Why not treat the two issues independently? By two issues I mean the existing debt and the proposed debt. Maybe a current account switch to Nationwide FlexDirect would see them match/go some way towards matching your existing overdraft facility at 0% for 12 months? Then see what you can get on the credit card front.


Over 20 months, the proposed credit card debt will cost you £165 a month. If you've that much spare cash why haven't you been throwing it at the overdraft? Or will you be redirecting £165 of the £300-400 currently reducing the overdraft each month?

FireWyrm

stevobreen73 wrote: »

Does this sound like a sensible idea? I've never had a credit card before so would appreciate some advice.

In short, no it doesnt.

You already have some unsustainable debt in the form of an overdraft which is costing you significant amounts of money. It would seem that you simply cannot afford the holiday.

Further to that, the only way to pay off your overdraft with a credit card is by using MBNA who allow Money transfers rather than just plain balance transfers. Although MBNA are notoriously liberal (they usually take anyone with a pulse) it does not guarantee you would be allowed such a card at a rate that would be sensible and sustainable.

Come over to the Debt Free Wannabe board and post an SOA where we can disect and discuss it. You seem to be on the cusp of disaster and when in a hole, stop digging.

Foxy-Stoat_3

The sensible idea would be to not go on holiday and pay your debts, save up and buy your holiday with cash, not credit.

andybrads

Hi there
I currently have a £900 overdraft which i am wanting to either totally clear or reduce to at least £250. Any advice on whether i should apply for a CC or take out a small loan (£1000) to do this. In addition we have just bought our first home which we would like to get some basic interior decorating done.

Any advice much appreciated.

DCFC79

andybrads wrote: »

Hi there
I currently have a £900 overdraft which i am wanting to either totally clear or reduce to at least £250. Any advice on whether i should apply for a CC or take out a small loan (£1000) to do this. In addition we have just bought our first home which we would like to get some basic interior decorating done.

Any advice much appreciated.

You would have been better off starting your own thread.

grumbler

MSE article: Cut Overdraft Costs

Surprisingly, it doesn't say anything about loans that can be very cheap nowadays: Cheap Personal Loans

What option is the cheapest depends on your credit history and on how fast you are going to clear your debt (don't stop on £250!).

Anthorn

I take a different view to others: It's always my opinion that if someone is comfortably making the payments on time then they cannot be living beyond their means. Personally I use credit as a means of extending my income rather than avoiding it.


Nevertheless, I would be inclined to pay off existing debt instead of taking on new debt. A holiday and a settee cannot be essential necessities. Good to have but not essential. On the other hand if there wasn't already debt I'd say go ahead with the holiday and settee.

grumbler

Anthorn wrote: »

I take a different view to others: It's always my opinion that if someone is comfortably making the payments on time then they cannot be living beyond their means.

Even if it's just minimum payments?

Personally I use credit as a means of extending my income rather than avoiding it.

If you pay interest, you can only cut your income, not extend it (unless you can get higher interest on your savings or the interest you pay is lower than the inflation rate).

Nevertheless, I would be inclined to pay off existing debt instead of taking on new debt. A holiday and a settee cannot be essential necessities.

Absolutely, but the post you replied to was 4-months old.

Anthorn

grumbler wrote: »

Even if it's just minimum payments?
If you pay interest, you can only cut your income, not extend it (unless you can get higher interest on your savings).Absolutely, but the post you replied to was 4-months old.

I don't see your point in cutting income. Credit used wisely must extend income because due to it you are spending more than you have. Looked at logically that is living beyond one's means but in that case taking out a mortgage to buy a house or taking out a loan to buy a car is similarly living beyond one's means.


But the thread was resurrected and the discussion will no doubt help someone in a similar situation

grumbler

Anthorn wrote: »

I don't see your point in cutting income. Credit used wisely must extend income because due to it you are spending more than you have.

Increasing spending isn't the same as increasing income. Sooner or later you have to pay back what you borrowed plus the interest, so your total/average income can get only smaller.

Looked at logically that is living beyond one's means but in that case taking out a mortgage to buy a house or taking out a loan to buy a car is similarly living beyond one's means.

Very often it is the case. E.g. when a person on £15K income with no savings decides to buy a £40K car only because the salary is bigger than monthly payments.