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  • FIRST POST
    • dankybett
    • By dankybett 20th Mar 17, 4:14 PM
    • 5Posts
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    dankybett
    Use ISA to pay off credit card?
    • #1
    • 20th Mar 17, 4:14 PM
    Use ISA to pay off credit card? 20th Mar 17 at 4:14 PM
    Hi moneysaving experts,

    I would really appreciate hearing some opinions on what to do with my current debt and savings.

    I have £4800 on a MBNA credit card which is just about to come to the end of its interest free period. So I am now trying to work out what to do next.

    I have saved:
    • £800 in a basic savings account
    • £2400 in help to buy ISA
    • and can continue putting £200 a month in savings (which is a standing order straight into the ISA).

    I also want to go to New Zealand in February for a friend's wedding which I imagine is going to cost a fortune.

    I have another credit card with a £3900 limit (with no money on it) which keeps offering me a 0% balance transfer deal.

    So I can't decide whether:

    a) Use everything I have saved to pay off as much of the credit card and then do a balance transfer for the remaining balance (losing potential future ISA bonus and all sense of savings progress which is demoralising)
    b) Pay about £1000 off the credit card and then do a balance transfer (keeping most of the ISA intact for now)
    c) Try and extend my £3900 credit card so that I can do a balance transfer without spending any of the savings (making new zealand holiday more possible)
    d) Anything else I haven't thought of?

    I know it is silly saving when I have the credit card debt. I have basically been in debt my whole adult life and then about a year ago I received a tax rebate which I couldn't bring myself to immediately use on the credit card debt. So instead I put it into the ISA and since then for the last year I have been motivated to save in a way that I could never motivate myself to pay off credit card debt.

    Any advice or tips welcome!
Page 1
    • enthusiasticsaver
    • By enthusiasticsaver 20th Mar 17, 4:23 PM
    • 3,211 Posts
    • 5,312 Thanks
    enthusiasticsaver
    • #2
    • 20th Mar 17, 4:23 PM
    • #2
    • 20th Mar 17, 4:23 PM
    Personally I see no point in saving if you have debt so I would go for option a and resolve going forward not to borrow for stuff but save. The holiday in New Zealand is something I would save and not borrow for.

    This constant debt cycle is something which is best broken. I am interested why you think it is acceptable to keep debt outstanding on credit cards and when you receive a lump sum you are reluctant to use it to pay off debt. Credit card debt is basically you spending other peoples' money so not sure why you are not motivated to pay it off. Also don't you find it annoying to have to find money from your pay check each month to pay off credit card monthly payments? That is what I used to find demoralising.
    Debt and mortgage free and saving for early retirement
    • takman
    • By takman 20th Mar 17, 4:59 PM
    • 2,081 Posts
    • 1,691 Thanks
    takman
    • #3
    • 20th Mar 17, 4:59 PM
    • #3
    • 20th Mar 17, 4:59 PM
    Have you tried applying for a card which offer 0% fee balance transfers?. If you can transfer the balance to 0% and it wont cost you anything then there is no reason not to do it aslong as you keep saving money so you can pay it off in the future.
    • Fosterdog
    • By Fosterdog 20th Mar 17, 5:01 PM
    • 2,813 Posts
    • 4,764 Thanks
    Fosterdog
    • #4
    • 20th Mar 17, 5:01 PM
    • #4
    • 20th Mar 17, 5:01 PM
    The problem with the above is that with no savings there is no buffer is something happens, such as washing machine failing, car needing a repair, losing a job or even just a problem with your pay. It is always better to have at least something saved as otherwise if something were to happen you would be straight back to credit cards and upping your debt. How much you need will depend on your circumstances, for some it is £500, some £1000 and for others even £5000. It's whatever you feel comfortable having as an emergency buffer.

    Anything above your minimum comfortable buffer should be thrown at debts
    • loey93
    • By loey93 20th Mar 17, 5:09 PM
    • 24 Posts
    • 7 Thanks
    loey93
    • #5
    • 20th Mar 17, 5:09 PM
    • #5
    • 20th Mar 17, 5:09 PM
    I see where you are coming from because I am in a similar position... I have debts yet I continue to put money away for savings... It does seem rather pointless and I am now thinking about just using my current savings to pay a few of my debts off and start from scratch.. :-/

    The sensible option however will be to go for option A
    Aiming to pay debts & save!
    • Fosterdog
    • By Fosterdog 20th Mar 17, 6:01 PM
    • 2,813 Posts
    • 4,764 Thanks
    Fosterdog
    • #6
    • 20th Mar 17, 6:01 PM
    • #6
    • 20th Mar 17, 6:01 PM
    As I said the sensible option is really a bit of both, you need something saved as an emergency huffy but everything else can be thrown at debt. With OPs figures I'd look at the interest rates between ISA and basic savings account and keep money in the highest paying. It may even be worth opening a new account with better rates and closing the basic one if it's not so good. I would keep £1000 in savings and either not add anything else until debt free or add £50 a month. The rest would go on debt now so a £2200 lump and the £150-£200 a month would continue to chip away at it. If you can get a good balance transfer deal it would be worth going for to give you some leeway especially if you are saving for New Zealand, it would be worth looking at prices now to start getting an idea of prices, most flight info is released 11 months before the flight so next Feb should be available now.
    • MonkeySaving?
    • By MonkeySaving? 20th Mar 17, 8:51 PM
    • 1,069 Posts
    • 682 Thanks
    MonkeySaving?
    • #7
    • 20th Mar 17, 8:51 PM
    • #7
    • 20th Mar 17, 8:51 PM
    My thoughts,

    Keep the ISA, it's free money from the Government and at a rate that will far exceed any charges you get from your current debt situation.
    Use £800 to pay against your existing CC balance
    Transfer the rest to your other CC at 0%

    Debts should always come first.
    55378008
    • dankybett
    • By dankybett 21st Mar 17, 9:02 AM
    • 5 Posts
    • 0 Thanks
    dankybett
    • #8
    • 21st Mar 17, 9:02 AM
    • #8
    • 21st Mar 17, 9:02 AM
    Thank you everyone for all of your wonderful replies. I really appreciate the difference in opinions and perspectives. It is so helpful being able to think this stuff through with you all. I haven't completely come to a decision yet but I think Fosterdog and Monkeysaving's suggestions feel like a good fit for me.

    There is something psychologically powerful about having money in the ISA which I think has been quite helpful for morale particularly when I am getting fed-up with restricting my spending. So I think I will try and maintain most of the ISA, pay a chunk of the credit card off, then transfer the remainder on a 0% fee basis.

    Also thanks for the flights tip fosterdog! I was wondering when I could start price checking as last time I looked it wouldn't show anything that far in advance.
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