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  • FIRST POST
    • layarph
    • By layarph 20th Sep 19, 9:48 AM
    • 2Posts
    • 0Thanks
    layarph
    0% credit card to pay off overdraft
    • #1
    • 20th Sep 19, 9:48 AM
    0% credit card to pay off overdraft 20th Sep 19 at 9:48 AM
    Hi all,
    I received my 0% credit card, and have received the necessary funds to pay off my overdraft.

    Of course, I need to pay the credit card off each month, where I am paying 200 per month.

    How did most people manage their overdraft with this? Did you just instantly minimise the overdraft amount by how much the credit card lent you, and then simply pay the credit card back over time?

    Thanks,
    Rob
Page 1
    • Terry Towelling
    • By Terry Towelling 20th Sep 19, 12:10 PM
    • 1,973 Posts
    • 1,665 Thanks
    Terry Towelling
    • #2
    • 20th Sep 19, 12:10 PM
    • #2
    • 20th Sep 19, 12:10 PM
    You mean you've done a Money Transfer (MT) to pay off your overdraft and now you are paying off the card at 200 pm. Did you have to pay a fee to get the Money Transfer and how much did your overdraft cost you each month in charges?

    I ask these questions because some people will have fee-free overdrafts and, rather than incurring a possible MT fee and shifting the debt to a product that will require a payment every month, they might simply choose to spend, say, 200 less every month from their bank account and reduce the overdraft at their own pace. I accept that requires discipline and care to achieve.

    Obviously, where someone has an overdraft subject to charges, the ongoing nature of those charges could quite quickly exceed any MT fee and the use of the MT to instantly switch the full overdraft to an interest-free product then makes perfect sense. Obviously this requires discipline too, but you have no choice with this option, as the MT card will require a payment every month regardless of your circumstances.

    Whatever your circumstances, and whatever method you choose, you still have to eradicate a debt and that won't always be easy. It is therefore important to understand exactly what created that debt in the first place and ensure that doesn't happen again.

    The worst thing would be for a person in this situation to end up dipping back into their overdraft simply to meet the monthly MT card payments.
    • layarph
    • By layarph 20th Sep 19, 12:23 PM
    • 2 Posts
    • 0 Thanks
    layarph
    • #3
    • 20th Sep 19, 12:23 PM
    • #3
    • 20th Sep 19, 12:23 PM
    Thank you for the reply and thoughtful advice.

    The method I have used is an MBNA credit card, and yes, transferred those funds into my debit account.
    To have a balance on this card is costing me essentially nothing.
    However, the overdraft is subject to charges, costing me around 80-90 per month.
    So as you imply, it makes sense for me to be putting that kind of money towards paying that overdraft off via the credit card, as opposed to simply paying it towards the privilege of having that overdraft.

    The reason I asked the question was because, whilst the MT has happened and funds transferred to my debit account, that overdraft is still very much available.
    I soon realised that, unless I contact the bank to reduce the overdraft straight away, I would just be paying the credit card balance off monthly, and once all that has done, my overdraft is still present and I haven't accomplished anything

    So I contacted my bank earlier to clear the overdraft via the funds provided by the credit card, and have the monthly payments set up to pay off the credit card.

    I hope this is the most efficient way to do manage this debt?

    Thanks again.
    • Terry Towelling
    • By Terry Towelling 20th Sep 19, 3:25 PM
    • 1,973 Posts
    • 1,665 Thanks
    Terry Towelling
    • #4
    • 20th Sep 19, 3:25 PM
    • #4
    • 20th Sep 19, 3:25 PM
    Yes, I would agree that avoiding those monthly overdraft fees is good and that will free up an extra 80/90 to enable faster clearance of the debt itself.

    As for retaining the overdraft facility, you will get a lot of opinions as to whether you should or shouldn't. The question is, how disciplined are you now that you've taken this step towards freedom from your overdraft debt? Only you can answer that, but if you are at all worried about sliding back into the overdraft, then it may be just as well to get rid of it.

    Your challenge now is to keep up the 200 monthly repayments to the credit card. Prior to this, you were only having to find 80/90 per month to cover the overdraft fees, but now you are having to find a full 200 per month to manage the credit card.

    You haven't said how big the debt is, or what the mandatory minimum monthly card payments are going to be but I imagine they must be less than 200. If so, that gives you the scope to reduce your card payments during 'lean' months, but I would hope that won't be necessary.

    As long as you have understood why you were in your overdraft and are confident that you can manage the 200 monthly commitment without getting into trouble, you should be OK. At the end of the day, clearing a debt is all about finding the money to do it - yes, reducing the cost of the debt is good, but you still have to understand that you were in debt for a reason, and identifying and resolving that will be necessary to avoid slipping back.
    • Ben8282
    • By Ben8282 20th Sep 19, 3:39 PM
    • 3,562 Posts
    • 1,970 Thanks
    Ben8282
    • #5
    • 20th Sep 19, 3:39 PM
    • #5
    • 20th Sep 19, 3:39 PM
    I find some of what you have written above to be rather strange.
    If you have made a money transfer to your current account, presumably being the account which was overdrawn, then, assuming the amount transferred was equal to or greater than the amount by which the account was overdrawn, then the account would have returned to credit. I therefore fail to understand why it was necessary to contact your bank to clear the overdraft via the funds provided.

    Yes, the overdraft facility will still be available to you but, assuming you restrain your temptation to use again, will cost you nothing as it is not being used.

    I think what you have done, using a 0% money transfer to clear an expensive overdraft, was a good move. Just be sure not to be tempted to use the overdraft facility again in the future and ensure that you repay the credit card by the end of the 0% period. You say that you intend to repay at the rate of 200 per-month. That is not necessarily the best way to go about things. While the idea is fine if you don't trust yourself not to spend the money, it may be better to make just the minimum payment to the credit card, save the money somewhere and make a big payment just prior to the expiry of the 0% period.
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