Overdraft or Credit Card - which is cheaper?

Consumerist

skm1960 wrote: »

I have an authorised OD of £1350, with a FlexDirect acc which I use each month.
£2300 owed on the CC.

Roughly, £1,350 @ 16% pa works out at about £18 pm interest charge compared to the £28 pm you pay in overdraft fees.

Do you have room within your credit card limit to add the £1,350 to it? Will your card allow a money transfer?

A money-transfer card often charges around a 4% transfer fee. So you'll need a credit limit of around £4,000 to transfer everything to a new card.

skm1960

Clapton:

-are you over drawn every single day of the month? YES
-if not how many days on average are you overdrawn?
-is your balance ever overdrawn by more than 1,350? NO

skm1960

Ref the current OD charges, I have gone back to Nwide to query this, as it should be 50p/day for an authorised OD. I checked back and it looks like they have overcharged me for 7 months.

Consumerist

skm1960 wrote: »

Ref the current OD charges, I have gone back to Nwide to query this, as it should be 50p/day for an authorised OD. I checked back and it looks like they have overcharged me for 7 months.

In that case there doesn't seem to be a lot to choose between the cost of the overdraft and the interest that would be charged on your card.

eskbanker

skm1960 wrote: »

Am I better working on getting rid of the O/D or should I focus on the CC debt?

To go back to your original question, even if the cost is roughly equivalent, the fact that overdrafts are repayable on demand means that they're not intended for long-term debt and therefore it generally makes more sense to have debt on a credit card rather than an overdraft if credit limits permit this.

Consumerist

As you pay off your credit card, the interest charges will reduce as you go but your problem is that the overdraft charge will remain the same until paid off in full. Whilst agreeing, in principle, with eskbanker, above, you will, at least, see some reduction in charges as you pay down your card.

I would say a money transfer to your current account seems probably the best option. Assuming a 4% fee, that will cost you £54. i.e. about 4 months overdraft charges (assuming £14 pm).

YorkshireBoy

skm1960 wrote: »

Ref the current OD charges, I have gone back to Nwide to query this, as it should be 50p/day for an authorised OD. I checked back and it looks like they have overcharged me for 7 months.

I think I know what's happened here. When they originally launched the account back in 2012 the authorised overdraft charges were indeed £1 per day...

http://www.nationwide.co.uk/about/media-centre-and-specialist-areas/media-centre/press-releases/archive/2012/11/nationwide-launches-flexdirect

However, they were also capped at £20 per month!

So there's been a heck of mix up with your account particulars. I had a similar thing when I opened my first few FlexDirect accounts a couple of years ago. I, and a few others on here, received outdated 'old stock' correspondence from them saying the fees were £1 a day, not the published 50p per day.

YorkshireBoy

Consumerist wrote: »

As you pay off your credit card, the interest charges will reduce as you go but your problem is that the overdraft charge will remain the same until paid off in full.

...unless the OP downgrades to FlexAccount and starts to pay debit interest instead.


That said, I agree with eskbanker that it's 'safer' to repay the O/D first.

skm1960

Nwide got back to me. Apparently I have to pay O/D interest as well as a 50p daily fee?

Consumerist

skm1960 wrote: »

Nwide got back to me. Apparently I have to pay O/D interest as well as a 50p daily fee?

I think I would challenge that.

You will need to look at the Ts&Cs for the Flex Direct account but from their <Rates & Charges (pdf)> there is no mention of overdraft interest. It's possible their currently available info is out of date so you'll need to investigate. Ask them what rate they are charging, for example.

Edit
From the pdf, it looks as though only the FlexAccount and Cash Card Account charge overdraft interest. It would seem that either you or Nationwide are referring to the wrong account type.