Potentially stupid question about APR's and Balances

jasonwatkins

Ok, I'm trying to clarify something but getting a bit confused and I'd be grateful if someone could maybe point me in the right direction.

I've recently been approved for a Capital One Classic (God only knows how ) and I also have a JD Williams Catalogue account.

My thinking is that I'd like to use the card to pay off JD Williams so I can close it, but I need to work out if it's worth my while doing so, so I need to work out if the amount I can afford to pay JD Williams per month will actually be better served paying off the card balance.

The JDW balance is £195 and I pay £15 a month. The minimum payment is £11.15 a month, so i'm only really paying off £3.85 a month at the moment.

Now, as far as I understand (which is probably wrong), the annual APR on the Capital One Classic is 34.9%. The minimum monthly payment is £5 or 4% of the outstanding balance.

So, if i've got this right (I can never do percentages...), 4% of £195 would be £7.80.

So if I continued to pay £15 a month, i'd actually be bringing the balance down by £7.20 a month instead of £3.85.

Does that sound right ?. If so, i'll likely do that and close the JDW account. If I can afford to pay more towards the balance every now and again, it'll likely make more of a dent paying it on the card rather than into JDW.

Thanks in advance and sorry i'm a bit dense

[Deleted User]

The JDW balance is £195 and I pay £15 a month. The minimum payment is £11.15 a month, so i'm only really paying off £3.85 a month at the moment.


the min.payment will include some repayment as well as interest,so you will be paying more than £3.85 off each month
i suspect that the apr`s on both will be simlar,best bet is up the payments to JDW and spend nothing on the cc

jasonwatkins

upping the payments isn't an option.

the apr on JDW is 34.1% so it's definitely less, although I accept that it's not that much.

Tixy

Keep the debt on the JDW account and you would pay £5.04 this month in interest, so if you pay off £15 the balance will reduce by £9.96

Move the debt to capital one - and you would pay £5.16 in interest, so the balance would reduce by £9.84.

If you keep paying £15 a month and the APRs stay the same as they are now and you keep with JDW you'll be paid off in 16months and pay £42 interest between now and then.
On Barclays it will still take you 16months and you'll pay £44 in interest.

So no point in trying to move it.

jasonwatkins

Thankyou very much for that - makes it very clear

I suppose you have to factor in the point that the JDW minimum payments will also decrease as the outstanding balance comes down as well so it may well mean that it would be cleared off slightly quicker.

Thanks again, at least i know what i'm doing now !

nomoneytoday

As the minimum decreases, if you keep the payments at £15 rather than reducing your payments the debt will clear quicker