Request for help re credit card debt

sirjeremy

I've just finished reading Martin's book and felt inspired to join this site for help. I admit that I'm hopeless with money and that alot of it went over my head and this is why I'm on here now.

I have two credit cards with debt totalling £4,300. I also have an overdraft with HSBC of £1,100 which I always use to the limit and I pay £11 interest on that every month.

One card is with HSBC which is £2,900 and the APR is 19.9% and the other one is with MBNA and there's £1,400 debt on that and the APR is 24.9%.

I used to have a low paid job so I could only pay the minimum payments but now my income is a bit better (£18,000 salary) and I know now after reading the book that I should be paying more than the minimum and perhaps be moving my balances to 0% cards, though I do worry about the impact this may have on my credit score. But I suppose reducing the balance of the cards is more important.

So my question is, what cards do you think I should move my balances over, that's if I should. Should I be making in-roads with my overdraft too, or just concentrate on the credit cards?

I know my problem isn't as serious as some of the ones Martin included in teh book but I really don't know anyone else to ask. Any comments would be gratefully appreciated. Thanks in advance.

mountainofdebt

And welcome to MSE!

First things first: to make the biggest impact on your debts, yes you are right you need to make more than your minimum payments but you need to target the debt with the highest APR first, so that you can minimise the amount of interest you end up paying.

From your initial post, it seems that the MBNA card is the highest so target that one with every spare penny you have....but waht APR is your overdraft at? If higher than the MBNA one then you need to target that first. A more visual way of what I'm saying can be seen at https://www.whatsthecost.com/snowballing. Once you have put ALL your debts in there you can see what order your debts should be prioritised in.

Yes by moving your debts to 0% cards you can quicken the rate at which you pay off your debts but there are a few golden rules you need to follow:

1. NEVER NEVER EVER spend a penny on the 0% card once you have trasnferred a balance - basically becasue the purchases will be at a higher rate than the transferred balance rate and guess what any payments you make go towards paying off the trasnferred balance first.

2. Once the trasnfer has been completed, cancel your old card - that way you won't be tempted to spend on them again and dig yourself a big hole.

If you do go down the route of the 0% card then I would also be tempted to reduce the limits on the existing cards as well before applying. Credit card compnaies get a bit nervous if you have access to lots of credit and will either give you a small limit or decline you, so you need to do a little preparation work first.

Also if you post on debt free wanabee board and post details of all your debts together with existing income and ALL outgoings, the people on there will be able to help you save ££££s so that you can throw these ££££s at the debt so it reduces quicker.

hth

sirjeremy

Thank you very much for the reply, I'll post again soon with my progress.