Overdraft vs credit card

Hi, community!

Why do you prefer to use overdraft instead of a credit card?


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Overdrafts are usually more expensive than credit cards, unless you have a special deal with the bank (some offer free overdrafts for students for example). So a credit card is usually a good idea unless your overdraft will work out cheaper.

There’s also the case where most credit cards give you 0% interest on the first month, so if you can pay back the entire balance before a month has passed it’ll work out cheaper, where as overdrafts are usually charged per-day so you incur interest immediately.


I use my overdraft as a safety net to ensure direct debits are paid on time, rather than being bounced if I am too close to £0.

Seeing my balance in the red first thing in the morning (direct debits are usually paid in the early hours) means I have the rest of the day to get money into my account to avoid the overdraft fee (or interest at another bank). Even if I don’t, a few days of charges/interests are usually worth it to avoid late payment fees or credit file marks.

Although Monzo don’t charge for bounced direct debits, a lot of recipient companies do, and will also place a record of bounced direct debits on your credit file.


Thank for your tip.

I don’t really see an overdraft as a replacement for a CC and they serve different purposes for me.

A CC is for planned expenditure where I choose to use the CC for specific purposes.

An overdraft on the other hand is more of a safety net to cover me in case a direct debit goes out the account when I don’t have enough in to cover it, which then allows me time to transfer some funds over to my Monzo account.

Just waiting for overdrafts on Monzo joint accounts now which we currently have at HSBC. We’ll then be over to move to Monzo fully.


A credit card is also useful for car rentals and hotels etc

Plus section 75 protection from a credit card for purchases is alot more powerful generally than chargeback on a debit card.

A credit card is also useful for car rentals and hotels etc

A credit card would behave the same as a current account in those cases too. The pre-authorised amount would still reduce your credit limit just like it would on a current account (on modern banks it’ll appear like it decreases your balance but actually as per the law you won’t be charged interest on that unless the amount is actually presented).

Right, but I’ve rented from places that were fussy for a credit card not a debit card , although most will take debits.

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Was pleased it was a credit card when the hire company wanted a £2500 deposit because I refused their insurance!