Tactics and pitfalls when interest rates are increased

bargainhunter90

thanks cell for this thread ive chosen to opt out from my card, pay off slowly saving $$$ in interest while making up zeros in my credit file.

dannykos

I opted out of my C1 rate increase - and the only word of caution from me would be the little chestnut that if ANY payment comes off your card after the opt-out, the ENTIRE balance reverts to the new rate they specified.

MAKE SURE YOU HAVE NO REGULAR PAYMENTS SETUP ON YOUR CARD BEFORE YOU OPT-OUT!!!

hth

CannyJock

Cell wrote: »

Responses would be appreciated

Welcome to the forum - nice to see an original poster get their post count over 1

CannyJock

Cell wrote: »

I'm taking the non 'snowballing' route rather than the highest APR one at the moment as the more cash I free up from one card the easier I can pay off the next lowest balance.

:eek:

Will come back to this in a minute

Cell wrote: »

Eventually I hope to be in a position to take lumps out of the big interest cards which have the biggest balance (eg £6000 on RBS Preference at 24%). It's partly psychological. Actually paying something off feels good and keeps you going I find.

Replace partly with totally and add even though it costs me more to the end of the sentence.

Maybe useful, maybe not, but what I've advised others in similiar situations to do is to basically set a plan where you know that you're doing the best thing, setup the DD's for minimums and then basically ignore them. Focus any compulsions you feel on how much you can divert to your maximum APR card and ignore the rest. In pounds and pence, this is the way to do it, no question. The psychology of any other method you overcome using any Jedi mind-trick that works.

Cell wrote: »

It may cost me more, but I am more likely to keep the faith my way whereas seeing a load of 'middling' balances all a long way away from being settled could be a bit dispiriting.

Gloat in the satisfaction that you're minimising the amount of interest these bean-counting plebians would extract from your hard-earned money. You generate wealth. They leech a percentage of it out of your wallet. The less they get over the longterm is what matters even if you're tempted to see it in any other light. The end-game is what matters. And the end-game is minimising the amount of your hard cash these parasites leech from you.

Cell

I suppose what I mean is that until I clear off the smallest debts I don't have the spare cash to pay off any more than the minimum on the rest. I have £250 left on one card which I've been paying at £75 a month. By Christmas that will be gone and I can add that payment to the next one which will have £400 on it by then. Within three more months I'll have £75 plus the £75 I'm paying on the other one spare.

If I put that extra original £75 towards my highest APR card then it will take more than two years before I free up any cash and I'll still be paying the minimum on the lower APR cards. If I added up the amount of interest I pay every month I'd probably top myself . It's part of my life. Paying cards OFF isn't. Therefore I am prepared to accept paying more interest in the long term in exchange for ridding myself of balances entirely.

Having reviewed the APRs applicable to my cards they range from 13.5% (Cap One, soon to be increased to 19%) to 29.85%. The majority are 23% or higher, so it's not as if there is a phenomenal difference between the top and the bottom.

NickX

Cell, you really need to follow CannyJock's logic here. He has a lot of experience with this and it is exactly the same advice that Martin would give.

You WILL pay off your debts quicker if you pay off the higher APR debts first, you really need to believe this and forget any psychological reasons for completely clearing accounts with lower APR - the number of accounts you have is not important, it is the levels of debt and the levels of APR that count.

For example, I have 6 credit card debts at present, but I'm not going to rush to pay them off because they are at 0% - why would I want to pay them off sooner than I have to ? What is important is that the APR is low, if they were high APR then I would be rid of them - to tackle your debts you need to understand the importance of clearing the high APR debts and getting the interest rates down.

I think I posted to you yesterday about using your wife's redundancy pay to clear high level APR debts - this is the same thing, the primary aim should be to get that APR down, not necessarily to clear the number of accounts that you have.

Hope you have a think about this, and good luck in getting it sorted.

Cell

Thanks for all your advice. I'll take a look at the whole thing once we receive confirmation of redundancy and details of the package.

moneysavingmarrow

Cell. Look at it this way.
The lenders with the lowest apr are lending you cheap money to pay off the high apr debts.
The more you can borrow from them, the better off you will be.
Therefore, pay off the minimum on the lower apr's.
Would you turn down an offer from Virgin to transfer the balance from your highest apr card at 0% for 16 months with only the minimum £25 a month to pay?
Or would you pay that off as fast as possible because it was your biggest debt?
All the time the smaller cards are active, you may even get offers to transfer at lower percentages for the life of the balance. ie. Halifax (if you have one) may offer something like 6.9% for the life with a fee which would be far cheaper than your highest apr card.

vet8

Cell wrote: »

However the overall trickle effect of these increases is to ensure that my efforts to pay off debt are eroded month by month. I do sometimes wonder why the CC industry, as a whole, do not get the message that anyone who is so indebted that they feel the risk of default is increased is only likely to be pushed further towards delinquncy by these increases. It's like cutting off the air supply while someone's being strangled!

Exactly! Well said.

andyguk

babyharry5 wrote: »

oh. by the way.
Luckily I was in a position to clear the debts off . When I informed the companies they really didnt give a hoot and were pleased to take my payment and subsequently close the cards down.
Not as pleased as me though!

ditto with same cards, same letters and same experience, they were practically closing my accounts before I even said anything on the phone. I am in no doubt that these increases are a way of them clearing stale accounts and they are subsequently making it harder for others to pay off.

I actually have money to invest now, however will I invest in any of these financial clowns? no way