Is it better to have credit card debt or to use my overdraft

[Deleted User]

Hi, I'm wondering if anyone can offer me some advice. I have about £1800 debt on my credit card, which to be honest seems to never decrease. I am wondering should I clear my credit card using my overdraft facility with my high street bank. I have never used the overdraft facility but have an overdraft of £3500. I plan to apply for a mortgage in the next year and didn't know whether the credit card debt would look "better" than the overdraft debt. I obviously know that any debt looks bad, but my question overall I suppose it what debt looks worse. If I paid the credit off I would obviously close the card but don't want my credit file to looked at badly by transferring the debt onto to current account. My credit file is actually in pretty good shape considering. Any advice would be greatly appreciated....

bradders1983

It doesnt matter which "looks worse", which one attracts the highest rate of interest?

D3xt3r5L4b

Neither is better than the other. You need to get it cleared. 

[Deleted User]

The other consideration is that your overdraft can be called in at any time, which would lead you straight into a default.

Instead of continuing to use your credit card and incurring interest on every penny you spend, out all new spending on a new credit card and clear that in full each month.  Then throw every spare penny at the card with the long term balance.

Emmia

Deleted_User said:

The other consideration is that your overdraft can be called in at any time, which would lead you straight into a default.

Instead of continuing to use your credit card and incurring interest on every penny you spend, out all new spending on a new credit card and clear that in full each month.  Then throw every spare penny at the card with the long term balance.

I don't think the OP is looking for more lines of credit - either way though the debt should be paid off, perhaps via a balance transfer to a 0% card, and doing a budget so they don't spend on either of the 2 credit cards or the overdraft. 

A £3.5k overdraft facility does seem rather excessive though - I'd probably request a reduction in the size. 

[Deleted User]

No, they're not, but it's a way of reducing their interest costs, which they may also find beneficial.

And of course, having only a single credit card leaves them vulnerable.

Don80

You need to look at the interest you're paying.  Many overdrafts are now about 40%, which likely makes that more expensive than a credit card.  If your card is on 0% that's probably easier to pay down, as your payments won't be paying off interest.  You could look at a 0% balance transfer if you're paying interest on your card (but sooner rather than later,  you don't want a hard search before a mortgage application).  Try the MSE Credit Club, Credit Karma and ClearScore to see your files, and possible borrowing options.  If a new card leaves you with a ridiculously high available credit, close the old one.  I was once told having about £8000 available on a card(s) was good.  Personally I'd be slashing the overdraft too, at 40% it's too expensive, and if you're not using it...

D3xt3r5L4b

Don80 said:

I was once told having about £8000 available on a card(s) was good. 

By whom...??

Emmia

The CRAs tell me that to maximize my (meaningless) score that I should take out more cards to have better credit availability (increasing from £5k available but not used to having £20k available) so that I can demonstrate I'm managing credit well...

I personally have no desire or need for more credit (and if used, credit does have to be repaid) so I'm actually pretty content with the amount I have... 

[Deleted User]

Hi @Emmia demonstrating good money and credit management is by repaying what you owe in a way that reduces the balance significantly.
The Credit Reference Agencies never offer better advice than the voice in your head that says 'stop paying all that extra interest by not paying enough each month'.


I'm now going to get up onto my box and preach to all and sundry/whoever will listen......😋😆

When being tempted to buy something dear and putting on credit think of how many hours you'll have to work to pay that off.....if it's more than a months hours ask yourself if it's really worth it.

Think about the cost of that item when the interest gets added to it....... it suddenly makes that thing not such a good buy.

jonesMUFCforever

Lets see now a bank overdraft at say 39% or a credit card at say 20% - gosh that is a difficult one?