1-minute guide to Overdraft Credit Cards

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Overdraft Credit Cards

Overdrafts, ESPECIALLY unauthorised overdrafts, are one of the most expensive ways to borrow money

The best credit cards online for paying off your overdraft could help you stop accumulating debt

And once you’re out of your overdraft STAY out of your overdraft with these 5 top tips for staying in the black

Need to know

  • To pay money directly into an account to clear an overdraft you need to do a money transfer (also known as a super balance transfer– it’s as heroic as it sounds)
  • Money transfer credit cards are different to balance transfer credit cards which will only allow you to move debt from one card to another
  • There will be a fee for money transfers, normally around 4%, so before deciding to transfer money across you need to ensure the savings will outweigh the fees
  • At the end of your deal ie. 0% on money transfers for 20 months, your interest rate will rise to that provider’s standard rate for money transfers and you will have to start paying interest on your outstanding balance
  • Make yourself a payment plan, if you have £2000 to pay off over a 20 month interest free period make sure you are paying at least £100 a month
  • Some cards have 0% interest on money transfers, but even if they don’t once you’ve got that debt out of your bank account and onto a card, you could then do a balance transfer and pay it off on a 0% balance transfer credit card

Overdraft Credit Cards

The best credit cards for paying off your overdraft could help you stop accumulating debt

5 tips for staying out of your overdraft

1. BUDGET know what you’ve got coming in and out and when, so you’ve got cash to cover bills. Figure out what you’ve got left over for fun things and limit your spending to to that

2. DIRECT DEBIT CHECK make sure there are no old direct debits draining your money. If there is an old direct debit that should have been cancelled see if you can get reimbursed, someone in our office got back £1000 of mobile phone insurance

3. DON’T OVERPAY for your bills. Find the best fixed rate energy tariff, make sure your insurance never-autorenews, get the best deal for your mortgage and get a cheap unlimited broadband package rather than paying for going over your limit

4. SHOP ONLINE doing your food shopping online is a great way to stop expensive (unhealthy) impulse buys like wine and sweets

5. PICK YOUR LUXURIES think about cancelling expensive gym contracts and getting fit for free. Plus giving up alcohol or smoking can make you and your bank balance FAR healthier

Watch out! Four rules for all credit cards

  • Don’t use your credit card to withdraw cash unless you have to. Your credit card is VERY likely to have a high interest rate on any cash that you take out which you will start getting charged from the moment you withdraw it. There is also likely to be a withdrawal fee (we’ve only found a couple with no fees at all). These rates won’t be affected by another deal you might have
  • Look out for annual fees. The fees tend to be charged so you can access higher rates of cashback, airmiles or similar. If you’re not getting a superb deal that makes up for the fee then the cards are not worth applying for
  • Be careful! A lot of 0% or low interest credit cards will automatically set your direct debit amount very low each month so that at the end of the interest free period you end up with a large outstanding balance
  • If you don’t make the minimum monthly repayment then you may lose your deal

The inside track

  • Most banks have text alerts and apps to help you keep track of your purchases. Start keeping receipts and check your balances regularly. The Money Advice Service has a great budgeting tool. It will take you 20 mins to fill in a detailed planner and you may need your bank statements, bills and payslips, but it is worth it
  • Have a look at this guide to credit rating to find ways to check and improve your credit rating
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Sarah Willingham
Sarah Willingham is a serial entrepreneur, business investor and leading consumer expert. She has received a number of accolades for her contribution to business including The Sunday Times 500 Most Influential People in Britain 2016, The Times 35 Most Successful Women Under 35, Business Weekly’s Young Entrepreneur of the Year, Courvoisier Top 500 and an entry into the Who’s Who of British Business Leaders. She holds three business degrees including an MBA from Cranfield School of Management, where she is also an advisory board member.