Not sure this makes sense - re paying CC off!!

Diana_Prince

Hi all!

Hoping for a little advice! I have 2 credit cards:

1 = £600 @ 30%
2 = £2200 @ 40%

:eek:

Anyway at the moment I'm throwing all spare cash at them and prob clearing between £250 - £400 a month. I was wondering whether it made sense to clear this off card 1 and then transfer some of card 2 over as its a lower % so that my min payment of card 2 comes down and I actually pay more off.

Or carry on as I am paying min on card 1 and any extra on card 2!!

Thanks

billymadbiker

Providing the 'transfer' fee is less than 10%:
Transfer as much as you can from card 2 onto card 1.
Then pay the minimum payment on card 1 and as much as you can on card 2 until card 2 is clear then start paying it all off of card 1.

You need to look at the 'cost-per-pound' of a debt, not the amount of the debt.

So, card 1 at £600 with 30% will cost:
£600 / 100 (to get 1%) = 6
6 x 30(% rate) = 180
180 / 600 = 0.30

Card 2:
£2200 / 100 = 22
22 x 40 (% rate) = 880
880 / 2200 = 0.40

So, Card 1 is costing you 30pence for every pound owed.
Card 2 is costiny you 40pence for every pound.

So, even though you can [pay off the lower balance quicker you will be better off paying the higher one first even if it takes longer to clear

Diana_Prince

Ok thanks, thats really helpful!!

I don't know what the transfer fee is so I think I'll keep going as I am!