I got a rebate cheque from the government. Do I use it to pay down (a portion of) my overdraft or my credit card?

[debtfree_oneyear]

Option 1: Pay down overdraft. Overdraft has a higher outstanding balance but a lower interest rate.

Option 2: Pay down credit card. Credit card has a smaller, outstanding balance but a higher interest rate.

overdraft

credit card

[Oliverlogan263]

Hmm that's a good question man. I'd probably lean towards paying down the credit card first.

Even though the overdraft has a bigger balance, cutting into the credit card is gonna save you more money in the long run. Those interest rates on cards are no joke!

Like you said, the card has a lower balance but higher rate. So throwing that cheque at it will wipe it out faster and stop you paying interest on future purchases too.

The overdraft will still be there but at least it's a lower interest. And once the card's paid, you can focus more money on knocking the overdraft down.

Plus banks are always pushing credit at ya and it's good to show you can pay it off quickly. Might even help build your credit score a bit too doing it that way.

So yeah bro, I'd chuck the rebate at the card first to cut those costs the most. Paying 18% vs 12% interest, easy choice! Let me know what you decide.

[strateguy632]

Credit card because of higher interest rates.

[Abbycado]

I'd say overdraft. Don't they keep adding to that? Your username is ironic to this post.

[debtfree_oneyear]

Adding to overdraft?

My username is about me working to become debt free in one year. I'm not debt free yet, and the year is not over.

[Abbycado]

Kinda cutting it close, eh?

Not adding to it. Does the bank keep adding to the overdraft if you don't pay it?

[debtfree_oneyear]

By year I don't mean calendar year. I only started my debt free journey about 6 months ago.

Overdraft is just like a credit card. You get charged interested once a month, which gets added to your balance

[BarryLiverstone]

Credit card

[debtfree_oneyear]

Why?

[BarryLiverstone]

Higher interest rate

[debtfree_oneyear]

Very true