Torn on saving or clearing debts

Naomim

Hi All,

I'm a little torn about what to do.

I have almost £13k of credit card debts. I've tarted around and got some good deals, low interest and 0% deals but can't get any more cards.

I pay £340 a month which covers minimum payments and is clearing off the highest APR card (Barclaycard 22.9%) at £150 a month. I only have £340 left to pay on there.

Every month I save money for things that I see as essentials that will come out throughout the year, car tax, MOT & repairs, car insurance & a small amount for emergencies. This comes to £165 a month.

Should I add this £165 to the £340 to clear the cards quicker? I'm guessing most of you will say yes BUT when the car tax & insurance comes up, if I haven't saved it's going to have to go on the cards and up the balance. I also get a bit panicky when I look at my spreadsheets knowing the money isn't there iykwim?

Thanks

Naomi

Tixy

The things you put specific money to one side for - the car insurance etc is not really savings, its just budgeting. And I would carry on doing this as you then don't have to rely on still have access to new credit.

The emergency part of the savings - I suppose it depends - does this tend to get used? how much is it? if its just a small proportion of the £165 I would carry on, if it works out as a lot more than that - say £80 of the £165 then I would stop this and divert to the debts.

silvdo

I think mathamatically the answer is simple if you use the money to pay off debt (non 0%) you will not pay interest on that amount and therfore you will have more money when you need to dip in to that debt again which will overall cost you less. So no saving is not a good idea on this basis.

This is exactly what i tried but it didnt work, Primarily because the list of essentials kept on growing and because their was no definitive line between what i had saved and what i was paying off, I always found a reason to dip accross the line, which even if you do once undermines the mathamatical benfit of doing this. So if you can control your finances better than me and cope with the temptation of the available credit limits i would pay off debt, but be careful.

Jennykins

I'd definitely save for the annual bills as you are doing. That means you'll have the money there when the time comes. If you dont do this then okay you're paying a bit more off your credit cards at the moment but then you'll have to add to them to pay the bills when the time comes!

Naomim

Your right Tixy, savings isn't the right word and "budget" is more appropriate.

£35pm is my emergency pot. It's the idea of the boiler breaking or something else happening that worries me. I might stop the "emergency" fund for a while and up the card payments just a bit and see how I get on with the panicky feeling

Knowing the difference between what you should do and what you want to do is so hard!

Naomi