What to do with the money?

bretw · 1 January 2015 at 5:05PM

Hey guys,

First post so go gentle on me!

I'm currently saving towards a house deposit and have an ISA set up that's steadily increasing, albeit not at the pace it could be. My dilemma at the moment is what to do with the money I'm putting aside each month as I have a credit card with a balance of around £2000 (it's at 0% and it's not money that I don't have, it's just to show credit is in use and more than the minimum payment is paid each month). Part of me thinks I should just pay off the credit card first whilst putting in a small amount in the ISA to stick to the terms but the other part of me wonders whether it'd be better to pay it all into the ISA and then at the end of the 0% term on my card, pay it off with money from the ISA. I know there'd be a hit on the interest but I'm not sure if the additional interest I'd earn from the extra money in the ISA would offset/make it worth it?

I may have rambled on a bit here and made it confusing but if anyone could spare some advice / ideas, that'd be great. If you need clarification on anything too, let me know!

Bret

colsten · 1 January 2015 at 5:22PM

How much is in your ISA, how much are you planning on paying in each month, what is your tax rate?

Interest paying current accounts are almost certainly going to be a better choice than a cash ISA. Clearly, the CC needs paying off when the 0% period ends.

YorkshireBoy · 1 January 2015 at 5:27PM

bretw wrote: »

I know there'd be a hit on the interest but I'm not sure if the additional interest I'd earn from the extra money in the ISA would offset/make it worth it?

Let me turn it round and ask a question...

If you were booking your 2015 summer holiday costing £1,000 now, and the agent only wanted a £100 deposit with the rest payable in June, would you say "oh no, I insist you have the extra £900 now"?

And another one...

If you saw a £20 note on the floor at the other side of the street would you cross the street and pick it up, or would you walk on by? The reason I picked £20 is because that's more-or-less what you could be throwing away by paying off the card when you don't need to if you save in high interest current accounts.

polymaff · 1 January 2015 at 7:29PM

Yet another Joe caught in the ISA headlights. Look for the best returns in your circumstances - not for the terms "ISA" or "Tax-Free". As Colsten says, certain Bank Accounts will almost certainly return more than your Cash ISA.

bretw · 1 January 2015 at 9:06PM

polymaff wrote: »

Yet another Joe caught in the ISA headlights. Look for the best returns in your circumstances - not for the terms "ISA" or "Tax-Free". As Colsten says, certain Bank Accounts will almost certainly return more than your Cash ISA.

I've had the ISA for 3 years now and I wasn't exactly posting to ask what the best return would be. I was just asking (what I now know was a silly question) whether or not I'd be better off paying into the ISA and then withdrawing from it later to pay off the credit card. I've done some maths now and the 0% was finishing sooner than I thought so I've gone with paying that off.

eastofeden · 1 January 2015 at 9:16PM

But I think you have missed the point though. There are plenty of current accounts that give you a better return than your ISA probably is. How much is in the ISA? You could spread some money across current accounts paying 5%, 4% and 3% very easily.

polymaff · 1 January 2015 at 9:25PM

bretw wrote: »

I've had the ISA for 3 years now and I wasn't exactly posting to ask what the best return would be. I was just asking (what I now know was a silly question) whether or not I'd be better off paying into the ISA and then withdrawing from it later to pay off the credit card. I've done some maths now and the 0% was finishing sooner than I thought so I've gone with paying that off.

Fine, but the advice you've been given is all good stuff - and following that advice will probably leave you better off.

And that is what this board is pretty much all about

bretw · 1 January 2015 at 9:40PM

Yeah, I get that I could get better elsewhere now but my question wasn't about that and it wasn't what I was fishing for at the time

I just wanted to know in my current situation, what the best bet would be. With the credit card paid off I have no "debt" as such so it's all saving so I'll definitely be looking at the best options. Please don't take what I've said the wrong way, I know you were trying to help and it's why I joined in the first place! It's just I wasn't asking whether I could get a better interest rate elsewhere :P

Archi_Bald · 1 January 2015 at 10:59PM

Horse has been led to water. Now, will it drink?

Eco_Miser · 1 January 2015 at 11:55PM

bretw wrote: »

It's just I wasn't asking whether I could get a better interest rate elsewhere

Lots of people don't ask whether they could get a better interest rate elsewhere, but we tell them anyway.
It's amazing how many didn't know how much more they could be getting.

TheTracker · 2 January 2015 at 2:56AM

YorkshireBoy wrote: »

If you saw a £20 note on the floor at the other side of the street would you cross the street and pick it up, or would you walk on by? The reason I picked £20 is because that's more-or-less what you could be throwing away by paying off the card when you don't need to if you save in high interest current accounts.

If I was saving for a house deposit I would ensure I had a history of paying off my CC in full each month rather than "living on credit". At least when I last looked that shows clearly on equifax.

Let me ask you a question. If you generally paid off your CC each month and they offered you a £5000 0% for 12 months would you take it? It makes logical sense to do so but I wouldn't/don't. Perhaps I should.

What to do with the money?

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