Q&A

Credit card vs overdraft

Hello, I hope someone can help me. I have a £4000 overdraft that I'd quite like to get out of! I'm currently doing my best to get out of debt (aren't we all) and so far, I'm managing alright - I've followed all of the advice on this site about how to pay things off and minimum payments etc. I have a strict budget every month (very boring at my age, but I know it's for the best!). However, I'm a little bit stuck. My Halifax overdraft costs me £2 a day as I'm over the £2500 £1 a day limit. All I am currently doing is transferring enough money into it to cover the interest plus about an extra £2 a month. I know that I should put more in it, but really, this is all I can afford to do. I have a Capital One credit card on which I have about £1400 which I pay an extortionate 37% APR. (I know this is bad, but I have a bad credit history and I originally got the card to help me build it up again. This is so far working, as I've never missed or been late with a payment). I recently applied, and was accepted for, a Halifax credit card which has a 12 month 0% balance transfer window on it, with a £2000 limit. This I want to use to help pay either some of my overdraft or all of my Capital One debt, so I save money on the interest and have my whole payment going towards paying off the debt. I'd just like to add here that I no longer use my overdraft or credit card at all, the only transactions on both every month are the interest. I have two questions. 1) Am I doing the right thing by opening another credit card just to use the 0% balance transfer to my advantage? (Do I even get an advantage this way?) 2) Would I be better off paying off my Capital One credit card in full using the Halifax card or would it make more financial sense to use it to pay some of my overdraft, enabling it to get under the £2500 limit and therefore halving the interest being put on it every month? I'm not very good at working out the overdraft daily interest versus the credit card APR...I've tried, but just can't get my head around it. I don't know which will save me the most amount of money and therefore help get me out of debt quicker. If anyone has any sound advice, I's very much appreciate it! Thank you. Ceri