Overdraft or Creditcard

MRsmummy

I hope this is in the right place, please point me in the direction I should be going if not as I am new here.

Basically, I currently have a £500 overdraft on my bank account. Now I know this is not a huge debt but I would like to clear it as soon as possible. I am selling some stuff to pay this debt off and saving this seperately until I have the full £500. I am considering getting a credit card, but I have never had one before. I am looking for some advise on what I should do, as I have tried reading up on credit cards and it is just a complete minefield for a newbie like me.

Dobbibill

MRsmummy wrote: »

I am selling some stuff to pay this debt off and saving this seperately until I have the full £500.

Hi MRsmummy - welcome to the forum.

Is there a reason you are saving the overdraft money rather than paying it into the overdrawn account?
Does your overdraft cost you in fees/charges?

MRsmummy

No I don't get charged fees, I have got a 123 current account so it is £1 per month with no fees.

I am saving it seperately as I don't want to spend it by accident by thinking I have more than I have got. Once I have £50, I pay it in and take £50 off (I'm not great with money so this works best for me).

Dobbibill

No charges is a good thing from a savings vs OD cost perspective.
On your credit file it will show 100% utilisation though, which isn't brilliant.

With regards to a credit card - why are you interested in getting one? They can be a brilliant tool if used correctly but a nightmare if not. Depending on lenders criteria including your financial circumstances, will depend on where/when/how you get yourself one.

MRsmummy

I am thinking a credit card for the simple fact that I can pay back my overdraft and keep my actual money in a separate account. At the moment, I have a £600 overdraft that is up to £500. I won't keep dipping into it as I can an overdraft as it's constantly there.

I work part time and get about £700 a month, bills are about £600 a month.

From your perspective, is it best to keep the overdraft in place and forget about a credit card?

enthusiasticsaver

If you are not great with money I would caution against a credit card. Is there a particular reason you want one? Re the overdraft I would urge you to repay it bit by bit rather than saving and paying it off in one go. Reduce the limit as you pay it off or is that what you are doing?

enthusiasticsaver

MRsmummy wrote: »

I am thinking a credit card for the simple fact that I can pay back my overdraft and keep my actual money in a separate account. At the moment, I have a £600 overdraft that is up to £500. I won't keep dipping into it as I can an overdraft as it's constantly there.

I work part time and get about £700 a month, bills are about £600 a month.

From your perspective, is it best to keep the overdraft in place and forget about a credit card?

On such a low wage I don't think an overdraft or a credit card is a good idea. Reduce the overdraft limit as you pay it off so you are not tempted to think it is your money and dip into it. If you only have £100 a month spare then borrowing is a complete no no.

MRsmummy

I only wanted one to pay my overdraft off in full but since writing it out, I think I have answered my own question. I am just paying off one I don't get charged for to pay back another that I would be charged for. I am paying it off £50 at a time and reducing it as I go.

MRsmummy

Thanks for the advice and thanks for helping me work it out. I will carry on as I am and just chip away at it bit by bit.

Dobbibill

I agree with enthusiasticsaver - steer clear of a credit card at the moment. Having £100 left after bills is not enough disposible income. It will become a slippery slope.

Pay off the OD ASAP - it can be recalled anytime by the bank so really should only be for short term borrowing. You are using over 80% of it.