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Paying off credit cards

Hello,

I'm currently trying to pay off my credit cards. I have three all with lowish balances (<£500). I was wanting some advice on the best way to pay them off whilst paying the least amount of interest.

I get paid monthly, and the credit cards are currently set to minimum amount.

The way I understand credit cards (and this might be wrong) is that any purchases made on the card aren't charged any interest for a month (is this a month after purchase or until the start of the next billing period?).

I was thinking I have 2 options;

1. Keep up minimum payments, then before payday see how much money I have left for payments and pay it off whichever card (snowballing). Do not use any of the cards.

2. On payday pay off large amounts from the cards, then use the cards when the cash starts to run low (to make payments - not get cash).

My theory is with option 2 I wont be paying interest on the money spent throughout that month.

Any thoughts?

Comments

  • Obi167
    Obi167 Posts: 290 Forumite
    Anyone?......
  • bengal-stripe
    bengal-stripe Posts: 3,353 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    Obi167 wrote: »
    ......that any purchases made on the card aren't charged any interest for a month (is this a month after purchase or until the start of the next billing period?).

    “Interest-free for purchases up to 52 days” only applies when the card gets settled in full.
    Obi167 wrote: »
    On payday pay off large amounts from the cards, then use the cards when the cash starts to run low (to make payments - not get cash).

    This is the better option.

    Interest is calculated daily, ergo, the lower the balance the less interest is due. If you pay a big chunk at the beginning of the cycle and then use it up in purchases towards the end, your interest due will be lower, as the average borrowing over that period will be lower.
  • Obi167
    Obi167 Posts: 290 Forumite
    Thanks for that. I didn't know about the settled in full thing, but i'm thinking that may be an option to pay one off in full, then use it, then the next month do it with another card.

    Thanks again - very useful.
  • exel1966
    exel1966 Posts: 5,011 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    edited 3 August 2010 at 1:18PM
    As above with reference to interest free for a month.

    You need to look at which card has the highest APR and allocate as much as possible towards that card each month. It's no good clearing a card which isn't charging as much as another. Always clear the one which is costing you most, first.

    You won't be receiving any of it interest free if you're not clearing in full each statement month unless it's under a promotional offer.

    You need to provide more detail such as cards, amounts and APR's to provide a comprehensive answer.
  • Obi167
    Obi167 Posts: 290 Forumite
    yeah, choosing the cards to pay off is quite easy - one of them is a Vanquis! the other 2 are 19.9.

    Another unrelated (slightly related) question. Vanquis was advertised as a credit builder. Is there anything different to normal credit cards - or is it just down to its easy acceptability?
  • exel1966
    exel1966 Posts: 5,011 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    Obi167 wrote: »
    yeah, choosing the cards to pay off is quite easy - one of them is a Vanquis! the other 2 are 19.9.

    Another unrelated (slightly related) question. Vanquis was advertised as a credit builder. Is there anything different to normal credit cards - or is it just down to its easy acceptability?

    Yes, they're different in that they are for people with no/little credit history or those that have had financial difficulty in the past. Numerous sub-prime cards such as Vanquish are marketed as credit building cards.

    They offer very small limts, high APR's because of higher associated risks and have no benefits attached to them.
  • Obi167
    Obi167 Posts: 290 Forumite
    thanks for your help.
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