WWYD - pay off the overdraft or credit card debt first?

[worriedmum100]

I've finally got a much waited for promotion which means that DP and I can finally organise our finances into a joint account.

I have about £340 in personal 'spends' a month left over after paying my share into joint account.

My personal account has an interest free overdraft of 2k for a year.

I have a £1000 credit card debt on a 0% credit card that's been floating around since I was a student. I've always moved it between 0% cards. I totally accept that this is my debt to service out of my own spends. The 0% period ends on this card sooner than the free overdraft period ends.

What I'm not sure about is whether I should just use the overdraft to get rid of the cc debt in one fell swoop and then look to gradually pay off the overdraft or choose a sensible amount out of monthly spends to pay it off the cc debt gradually without using overdraft.

I've seen some brilliant financial advice given on here before and would welcome MNetters wisdom on this one. Because they are both 0% interest I'm not sure how to prioritise (if that makes sense).

Thank you!

Are you sure there are no charges for the interest free overdraft?

When you move the 0% debt around cards, are you paying transfer fees? Are you making any repayments?

If the OD is free for longer def pay off your CC asap but if you have a few months before the 0% runs out then spread it over a few months so you don't max out on the OD.

How much can you pay off the card before the 0% period ends? I'd probably throw everything at the card until the interest rate rises, then transfer to overdraft and just reduce the limit accordingly each payday. Sound like a plan?

Beware that overdraft facilities can be stopped by the bank any time but if you have a good credit record you could easily pay it off with another 0% card, but that would incur a fee, usually 3%.

So you aren't currently using your overdraft but you are considering using it to pay off a debt?

Personally I would just pay off what you can afford off the credit card each month. Even if you do £250 a month for 4 months that would still leave you with some spends each month but clear that debt. (obviously you may need to pay more to cover interest)

Most interest free credit cards charge a daft amount to transfer the debt anyway.

Thanks for the quick replies. Will try and answer the questions.

The current account overdraft is definitely free of interest for 12 months - it was one of its USPs and the reason I chose it.

My credt history is good its just that's I've never earned enough (til now) to really make a dent in the cc. There were times when I got it down a bit but it would gradually creep up again around Xmas and at the end of the month before payday etc. I accept I'm not the best with money. I'm not extravagant but can be a bit of a fritterer. In my defence I have high commuting costs and when my promotion never materialised (on return from mat leave) I was left in a position of going parttime but at a much lower salary than I was expecting. So the cc debt has remained.

Yes when I have moved it previously I paid the fees.

I know I'm really lucky to have a decent amount of spends and want to use it wisely!

I think I might throw as much as I can at cc until 0% period runs out and then see where I am? I just don't want to leave myself short in current account so that I end up using overdraft anyway. I have I'm the back of my mind that Christmas is coming up etc. I probably need to think realistically about what I will spend which I'm not very good at....

Open an internet saver and set up a standing order for £100 a month for Christmas. Set up a second standing order for £150 a month to pay off the card. Reduce your overdraft limit to £750.

After Christmas use any leftover savings to pay off card, and increase standing order to £250 a month until card cleared. If card rate ends sooner, transfer to overdraft and instead of standing order use the technique of reducing overdraft limit by £250 each payday.

Wow. That's what I call a plan!

Thank you very much. :)

Agree with Fff about setting up a savings account for Christmas - your partner should contribute equally to this.

I would continue to save after Christmas for next Christmas , but reduce the amount per month as you now have a year. I would pay off the card first asyou do pay for that , albeit as transfer fees.

All Chrismas presents for ds and food are covered by joint account so only need to save for dps presents and my immediate family (we usually buy for our own parents, siblings etc) but agree good idea to save for next year too.

We've factored in joint savings into contributions to joint account (for house things and holidays) but I want to save for myself as well so this advice gives me a place to start.

Thanks again all.

I would put all the 'extra' money in the highest paying instant access savings account or isa you can, and earn money on it while your debt is at 0%.

Pay off the debt when the 0% rate ends (which will mean you have more money to use to pay it off, as you have interest)

If there is likely to not be enough to pay off all the debt, leave the balance on either

a) the credit card, if you can get another 0% balance transfer or even a low rate life of balance deal (as its generally easier to get these deals between credit card accounts) or

b) the debt that has the lowest interest rate, and pay it off as soon as possible.

Obviously you would need to continue paying minimum payments for your credit card.