Credit Card vs Overdraft

ctg_2

Hi I am new here. Hope I am posting this in the correct place. I have both credit card as well as overdraft facilities. I am just wondering -- if I have some cash to settle either one, which one should i settle first to cut down on interest lost? The credit card charges 24% per year, the overdraft at 19% per year, but I understand that for the OD interests is calculated daily. Does this mean that in the long term, the OD interests will be even more than the credit card interests, assuming that I owe both the same amount of money?

Recently I tried to make full payment for my OD. I paid the "full" amount as shown on the last bill, but to my horror, i was still charged interest when i received the next bill! This I was told is because of the period lapsed between the last bill statement and date of payment. so it looks like I can never finish paying?!?!?1\

Can someone help me pplease? Thanks

CLAPTON

Interest is charged daily on both the OD and the CC.

So if you pay the full amount off on a CC or your OD based on a specific bill then there will be still be interest charged for the period between the bill date and the time you paid in the money.

Pay any money you have to the highest APR debt which looks like the CC. Because of the way interest works you will need to pay the full amount on the bill for two consecutive months before there is no more interest charged.

Then start to work on the OD.

ctg_2

Hi Clapton

Thanks for your advice. i am simply hopeless with all this interest calculations. Got another question -- if i have a few credit card bills outstanding, some bigger and some smaller amounts, does it make any difference (to the total interests chargeable, if all cards are at 24% interest) which card I pay first? I mean, should I try to clear the smaller debts first, and close that card, or should I try to pay off the bigger ones over several occasions? Or is it actually the same?

I was just thinking that regardless of which card i pay first, the total outsanding will be the same? Take for eg,
I owe bank A $3000,
bank B $4000,
bank C $10000,
so total outstanding is $17000.
If I can pay $3000, does it make a difference to the interest if I pay $3000 to bank A (and close the card), or B or C?

I hope you can understand what I am trying to say here. thanks!

CLAPTON

the key point is to pay the debt with the highest APR first. however if they are all the same then it doesn't make any difference although you may feel that its nice to pay off a debt.

can you not try to apply for a low LOB CC and shift some of the debt to a lower APR.

ctg_2

Hi Clapton

Please forgive my ignorance, but what is a LOB CC?

jonathon_hart

Life of Balance Credit card. There is an article about Balance transfers on the site, you may wish to read that.

There is a link to it at the top of this forum