Question:
My resolution this year is to get rid of my credit card; I currently owe about R12 000, and I also have an overdraft. My question is: which one of the two is better when it comes to interest charged? I've heard that credit cards charge about 17.5 percent interest. How much do overdrafts charge? And what about my car loan?

Answer:
Usually an overdraft is slightly cheaper than a credit card in terms of interest. This however depends on the relationship you have with your bank.

The best way to start getting rid of your debt is to tackle the debt with the smallest balance — whether it be credit card debt or overdraft debt. The reason for this is that you will see results sooner and it will give you encouragement to carry on. But remember: you must keep up your payment on your credit card all the while, otherwise you will be fooling yourself.

So how can you find that extra bit of money to tackle your debt? Examine your spending patterns and identify the inefficiencies. Use whatever spare cash you have, and once that overdraft debt is out of the way, you can use the money you have freed up to eliminate the outstanding credit card debt.

It may take you a year to 18 months to achieve your goal but it is well worth it. You can even try and settle your car loan sooner with the money you have saved. So in three years, you could be completely debt free and then you could start saving for your own home. It is a resolution well worth fighting for.

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