which do i pay - so confused?

rose08

Hello

I have two CCs, HSBC and MBNA.

I want to pay about half of the overall balances off right now, and i'm not sure which one to pay.

I'm hoping that either will have a balance transfer offer coming up soon so that i can shift the remaining balance and save some £s.

HSBC currently 20.9% APR (ouch)! and MBNA's not much better, there's not a lot in it. Minimum payments HSBC 2.5% of outstanding balance / MBNA minimum payment is monthly interest + 1% of balance (if i've read and understood it correctly)! it's so confusing.

From my experience i've found that HSBC are better to deal with, MBNA seem to have some kind of attitude, or maybe it's just me.

Any advice would be welcome
thank you

lee1985

Rose,

You mustn't get the minimum payment confused with the debt itself. The The lower the minimum, the less paid towards the debt and therefore the slower the debt will get paid off. Some minimum payments don't even cover the interest payments and therefore the debt goes up!

The best form of action is usually to pay as much as you can off the card with the highest interest rate, forget the minimum percentages but do make sure that you pay at least the minimum on all your cards. However, it is important that each individual such as yourself considers his or her own circumstances including the debt owed, which is also important.

If you have two cards with similar rates but one has a significantly larger balance then you would usually focus on the one with the larger balance because even though the interest rate may be slightly less, because of the interest-to-balance ratio you are actually throwing away a lot more money by way of larger interest payments.

So, consider your balances and the interest rates and use the above advice to pay off as much as you can towards the card where you are paying the most interest.

rose08

hello lee1985
thank you for your reply

the numbers are:

HSBC £1950 -credit limit £4000
MBNA £2100 - credit limit £2600

Interest % is pretty much the same. The way that they calculate minimum payment differs - HSBC 2.5% of the balance, and MBNA 1% of the balance + accrued interest.

and i have £1600 which i can use to pay some off right away.

what would you suggest?

many thanks for your help
R

tph86

Why are you worried about minimum repayments?

YorkshireBoy

Has the MBNA account been run well (over the years, but especially in recent times)?

rose08

hello

I'm not too worried about the minimum payments, however in the short term i need to be a little extra careful with my money.

Both cards were run well and paid promptly until a couple of months ago. I've not been well and tbh haven't been able to do much at all until now.

sorry i have £1900 i can use to pay some off, not £1600

many thanks
R

JimBlizz

The minimum payments are irrelevant. Pay the one with the highest interest rate. :money:

YorkshireBoy

rose08 wrote: »

Both cards were run well and paid promptly until a couple of months ago.

Does this mean you've missed some payments?

Had you managed your MBNA account well I'd have suggested paying it all off that card. That's because there's far more chance of MBNA coming up trumps with a follow on offer (with a zero or near zero balance) than there is with HSBC. And if they don't, then close the account and apply elsewhere for a BT for the remainder on HSBC with much lower available credit showing on your CRA file.

rose08

YorkshireBoy wrote: »

Does this mean you've missed some payments?

Had you managed your MBNA account well I'd have suggested paying it all off that card. That's because there's far more chance of MBNA coming up trumps with a follow on offer (with a zero or near zero balance) than there is with HSBC. And if they don't, then close the account and apply elsewhere for a BT for the remainder on HSBC with much lower available credit showing on your CRA file.

yes i missed a couple of payments on both cards.

I've since brought them both up to date.

HSBC have increased the credit limit on my card last month, i didn't request this they just did it which i thought a little strange because i'd missed a couple of payments over the last few months.

thank you

YorkshireBoy

rose08 wrote: »

yes i missed a couple of payments on both cards.

In that case there's little, if any, benefit to be had in trying to play the system and you may as well pay it off the card with the highest APR.

There's obviously a good reason why you don't try for a 0% BT card elsewhere (aside from the 4 missed payments)?

rose08

YorkshireBoy wrote: »

In that case there's little, if any, benefit to be had in trying to play the system and you may as well pay it off the card with the highest APR.

There's obviously a good reason why you don't try for a 0% BT card elsewhere (aside from the 4 missed payments)?

yes, i doubt i'd be able to get another cc at the moment because of the missed payments and because my income's dropped over the last couple of months.

Do you think that in paying £1900 off then continuing to pay as i did before (i hardly ever missed any until just recently). that i might be able to get a BT with mbna or perhaps another cc.

once again, many thanks R