Lump sum of money received, what to do with it

Delaney23

I'm in need in a bit of advice.

I have 2 credit cards. First one has approx £2.5k on an average interest rate, second has 4.5k on a very high interest rate. I've just been given 1k to pay off some of this, but am unsure of how best to do this; All into the high interest to get the amount down, or split it between the two. I am already paying back a certain amount of cash each month, then calling the cards up and reducing the arrears, to get the interest per month down, so i also thought about holding on to the money and filtering it through every month.

Any advice would be v.welcome.!!

Cheers
jack

dylanuk

You should pay the whole amount onto the highest interest card straight away.

Credit card interest is charged daily on the balance owing - so the sooner you reduce the balance the quicker your monthly payments will make more of a dent in the balance owing and less will be lost in interest charges.

Additionally, if you have any available credit on the 'average interest rate' card - it is worth phoning up that issuer and asking if they would allow you to move some balance over from the higher interest rate card without a handling fee.

TFD_2

I would take what Dyl said and add this: Don't pay a penny more than the minimum payment each month on the card with the low APR - just bung everything you've got at the other card for now. That will save you a surprising amount of cash.

Delaney23

thanks, that's what i thought, but wasn't sure..!! I'll be doing that first thing monday morning, once the cheque clears..!

Did think about only paying the minimum on the card with the lesser rate, so will probably do that aswell..

TFD_2

Delaney23 wrote: »

Did think about only paying the minimum on the card with the lesser rate, so will probably do that aswell..

Make it a definitely, not a probably.

Think of it this way: Say you owed 2 loan sharks money. One beat you up every week, and one beat you up daily; would you pay them back equally, or the more psychotic one first?

Delaney23

good point well made.. I shall change it tomorrow...!! Thanks again for the advice..!!