Overdraft? Credit Card?

bex88

Hi all,

So I've got a few things like birthdays etc coming up soon and I am short in funds this month, so I was thinking maybe I should apply for an overdraft, or even a credit card?

I don't have and have never had either, so it's all new to me. Basically I want something to use when I need it for small purchases and then I can pay off in full on the next payday - with no interest or fees ideally.

My bank says the overdrafts they offer is free up to £10 and a fee + interest after that per month. I was thinking maybe a credit card would be better if I wouldn't have to pay any interest and allow a better limit? I'm not sure.

I have a very low income, around £5500 on average a year but can change as I'm on low hour contract and all other hours is overtime so my pay varies month to month.

I did an eligibility check and it came up with Tesco Low APR 80% success (I'm also a tesco employee, not sure if that makes any difference?) and The Barclaycard Initial at 80% also.

Any advice appreciated.

bengalknights

If you spend on a creditcard you will incur interest unless you pay off in full by statement date

bex88

Hi thanks, yes I understand that. Just wondered if anyone could advise what might be my best option.

TheShape

How much do you think you will need to borrow?
What current account do you have?
What's the fee and the interest on the overdraft and what's the APR on the credit card?

PeacefulWaters

Open a savings account and put money in it regularly.

bex88

TheShape wrote: »

How much do you think you will need to borrow?
What current account do you have?
What's the fee and the interest on the overdraft and what's the APR on the credit card?

Likely only smallish amounts here n there, only would put on what I could afford to pay off on the next payday, so probably up to £100, but likely often perhaps just say £30-40.

I have a Natwest Select Account.
Overdraft is fee £6 for the month + I think it's 1.52% interest a day.
Interest Free Threshold up to £10.

For credit cards I would want to pay them off in full so was hoping for something that wouldn't charge any fees or interests if there are options for something like that?

Open a savings account and put money in it regularly

A nice idea I could perhaps do in future.

TheShape

There is an overdraft fees calculator on the NatWest website that you may find useful.

As an example I input £100 borrowed for 30 days on an authorised overdraft. The cost was £7.50 of which £6 was the fee (the interest rate EAR is 19.89).

A Credit Card will likely give you cheaper borrowing even free borrowing if you pay in full each month.

A potentially better solution may be to switch to a current account with lower overdraft charges.

Mr_Goodkat

If you are going to clear the balance in full each month then a credit card would be best as it won't cost you anything as long as you get a fee free one and don't do any cash withdrawals.

The usage fees on the Nat West account making borrowing small amounts quite expensive - switching to First Direct Bank (if accepted) would give you access to a £500 overdraft with the first £250 interest and fee free which would cover your needs. You would also get access to the regular saver meaning you could save for these things in the future at up to £300 per month and get 5% interest (you need to keep the account running for 12 months to get this rate).

bex88

Thanks for the advice all

That first direct bank sounds like it's got a pretty good deal, thing is, and I know it's probably silly, but I've only ever been with Natwest and they have been so so good when i've had my paypal etc hacked.
Also there are branches in both towns nearest to me which is handy.

I did think a credit card might be the better option if I can get away with not paying any fees or interest.

So credit card wise, I'm still unsure on which, I would like one that I can buy things on and wont get any added on interest if I pay it in full, do they all work like that or? I see many of the 0% purchase ones but they are just promotional offer that lasts from like 3+ months and then thats it.

Say the Tesco Low APR card, would I be able to buy wha I wanted on that, pay it off and not have to pay any interest so long as it's paid off in a certain amount of time?

TheShape

It sounds like you've decided you want to stay with Natwest and to get a Credit Card.

The Tesco Credit Card will allow you to make purchases and not pay any interest so long as you pay the full statement amount each month.

When you apply you should be able to set up a Direct Debit straight away to pay the full amount each month. When you get your first statement, check that it says that this is what will happen.

Also, check on each statement the date that payment will be taken so you can ensure you have enough money in your account to cover it.

Don't concern yourself with any promotional offers, simply pay in full each month.

NEVER go over your credit limit and NEVER get cash out of a Cash Machine with it.

bex88

TheShape wrote: »

It sounds like you've decided you want to stay with Natwest and to get a Credit Card.

The Tesco Credit Card will allow you to make purchases and not pay any interest so long as you pay the full statement amount each month.

When you apply you should be able to set up a Direct Debit straight away to pay the full amount each month. When you get your first statement, check that it says that this is what will happen.

Also, check on each statement the date that payment will be taken so you can ensure you have enough money in your account to cover it.

Don't concern yourself with any promotional offers, simply pay in full each month.

NEVER go over your credit limit and NEVER get cash out of a Cash Machine with it.

Thanks so much, that sounds just like what I'd like, so I think I will try and apply for that one.

What I've actually done this month for that little extra money is I realised I had some Tesco shares I could sell and since we had good half year results the share price went up a lot so got a decent price for them