Paying off the overdraft with credit cards

notonker

Having discussed with my wife, we are weighing up either a) Money Transfer card, or b) consolidate this £5k into an existing loan and extend the end date by 6 months to make the new repayments more manageable.

0% Card I guess would be the winner for a lot of people here who are good at keep an eye out for the next jump etc. However, the preference at the moment is the loan - it's a fairly low APR (due to amount of money), we can overpay on it (I know you can on the card too), but most importantly...no temptation to 'just put that new x on the credit card' or 'we deserve a holiday, let's just put it on the card'. Loan gets paid each month and no one tempts you with offers on the card or increases to the limit etc!

With the loan, we would be paying an extra £50 a month and would be debt free by August 2017, if we aren't able to throw more money at it when any comes available that isn't earmarked for more entertaining purchases.

notonker

JimmyTheWig wrote: »

As you say you might not get a new card at the end of that. Your circumstances might have changed so you no longer qualify, or banks might not be doing them, etc.
But in general, yes, that's the way to go.

Indeed, and then the APR is going to cause up problems. I posted at the same time as you I think, and as I've said there I think we are edging towards the loan route. Probably not in the spirit of the more elite MSEers, but seems the less risky 'set and forget' option.

JimmyTheWig

notonker wrote: »

0% Card I guess would be the winner for a lot of people here who are good at keep an eye out for the next jump etc.

Depending on the APR of the loan, I'd be tempted to guess it would be cheaper to pay off the majority on the 0% then pay the hefty credit card interest than it would be to pay interest on the loan for the whole time. But without the figures it is hard to call, and probably not much in it either way.

However, the preference at the moment is the loan - it's a fairly low APR (due to amount of money), we can overpay on it (I know you can on the card too), but most importantly...no temptation to 'just put that new x on the credit card' or 'we deserve a holiday, let's just put it on the card'. Loan gets paid each month and no one tempts you with offers on the card or increases to the limit etc!

While, as you suggest, this isn't what I would do, I think the important thing to do is what is right for you.
You could save interest via the 0% card, but then spend way more than the interest saved on stuff that you don't need if you're not doing things in a way that is right for you.

On that note, do you know why you built up this overdraft in the first place?
Have you now done a budget that you are sticking to?
The concern for me would be to get a loan (or a 0% credit card for that matter) and then let the overdraft build up again.

notonker

JimmyTheWig wrote: »

While, as you suggest, this isn't what I would do, I think the important thing to do is what is right for you.
You could save interest via the 0% card, but then spend way more than the interest saved on stuff that you don't need if you're not doing things in a way that is right for you.

yeah, and the card option is still on the table really. Even if it's just for some of the debt, say £2,500 on the 0% card that we can pay comfortably and the rest on the loan, at least some is getting paid at 0%.

JimmyTheWig wrote: »

On that note, do you know why you built up this overdraft in the first place?
Have you now done a budget that you are sticking to?
The concern for me would be to get a loan (or a 0% credit card for that matter) and then let the overdraft build up again.

Good question! It was foolishness and, ahem, a new credit card. Let an overdraft materialise, paid off the overdraft on a new credit card, then let the overdraft creep back up gradually. The credit card debt is now the loan. So when I say it 'out loud', the obvious and sensible solution is a loan and no more cards. But I like to think we have learned our lesson and are heading to a debt free position within 2.5 years, one way or another.

JimmyTheWig

Glad to hear that you've learned from it and have a plan to get debt free. It is sometimes a difficult place to get out of.

Some people suggest putting credit cards in a bowl of water and putting them in the freezer.
Means you've got the cards in an honest emergency, but would make you think twice betfore using them.

notonker

JimmyTheWig wrote: »

Some people suggest putting credit cards in a bowl of water and putting them in the freezer.
Means you've got the cards in an honest emergency, but would make you think twice betfore using them.

Haha, I see how that could work. Thanks again for your help.

CLAPTON

notonker wrote: »

Having discussed with my wife, we are weighing up either a) Money Transfer card, or b) consolidate this £5k into an existing loan and extend the end date by 6 months to make the new repayments more manageable.

0% Card I guess would be the winner for a lot of people here who are good at keep an eye out for the next jump etc. However, the preference at the moment is the loan - it's a fairly low APR (due to amount of money), we can overpay on it (I know you can on the card too), but most importantly...no temptation to 'just put that new x on the credit card' or 'we deserve a holiday, let's just put it on the card'. Loan gets paid each month and no one tempts you with offers on the card or increases to the limit etc!

With the loan, we would be paying an extra £50 a month and would be debt free by August 2017, if we aren't able to throw more money at it when any comes available that isn't earmarked for more entertaining purchases.

if you would pay only 50 per month more for about 30 months : that is only 1,500 so how does that clear a 5,000 debt?

eskbanker

JimmyTheWig wrote: »

Some people suggest putting credit cards in a bowl of water and putting them in the freezer.
Means you've got the cards in an honest emergency, but would make you think twice betfore using them.

Ah, so that's what they mean by liquidating your assets!

notonker

CLAPTON wrote: »

if you would pay only 50 per month more for about 30 months : that is only 1,500 so how does that clear a 5,000 debt?

I mean £50 extra on top of what we are paying in overdraft fees at the moment.