In need of advice

Not_so_Richy_Rich

I'm hoping someone can advise / confirm my thoughts..
I have a c/card with a balance of £5012 and a limit of £7200.
My monthly payment (min) is around £100 a month apr is 9.9%.
I have come into some money (£5k).
Maybe a silly question but should I just pay the c/card off and save the £100 a month??
If the answer is yes am I best off reducing the limit or closing my card?

I would appreciate your thoughts.

It_can_get_better

If you haven't got anything more pressing than the credit card, pay it off, or at least a good chunk of it.

Don't see the need to reduce the limit, unless you're going to be tempted to spend it again. If you can't control the spending on the card, than reduce it to an amount you're comfortable with.

McKneff

Think about being completely out of debt, you would have this extra £100 a month that you arent going to be paying for nothing as most of it will be interest. Interest is you giving somebody else money for nothing. Its a no brainer to me.

Then cut your card up................

Tixy

Definitely pay off the debt. And try to start some savings with the £100 spare each month.

If this is your only credit card then you might want to hang on it for the added purchase protection on large items (and then paying off in full), but only worth it if you are sure you won't be tempted to use it and run up a balance again that you can't afford to repay.

McKneff

You dont need to cancel your card. Just make sure there is not a dormancy fee and then cut it up.

Not_so_Richy_Rich

Thanks for the advice,
I was unsure as the money was sentimental (death of a relative).
I guess I know it makes sense to clear the debt.
I was thinking of at least lowering the limit on the card???

It_can_get_better

Not_so_Richy_Rich wrote: »

Thanks for the advice,
I was unsure as the money was sentimental (death of a relative).
I guess I know it makes sense to clear the debt.
I was thinking of at least lowering the limit on the card???

I'm sure they'd be happy with you using the money to make yourself more financially secure. Don't feel guilty, it's better than spending it on something you don't need.

Tixy

Not_so_Richy_Rich wrote: »

I was unsure as the money was sentimental (death of a relative).
I guess I know it makes sense to clear the debt.
I was thinking of at least lowering the limit on the card???

I have been in a similar situation (smaller figure), and the decision then isn't always totally motivated by finding the cheapest option.

In my case I tried to ask myself what the relative would have wanted - and decided that paying off debts would have been something they approved of, so in my case I put the majority towards debts and then made a purchase with the remainder that was something I knew they'd have liked and been very pleased for me to have.

I'd agree its a good idea to drop the limit if you are keeping the card.

Not_so_Richy_Rich

Bit of a head 'v' heart decision.
I will clear the debt. What's the thoughts with the cleared credit card?
I can trust myself not to use it but would feel more comfortable with a lower limit. Would it affect my credit rating etc?

Tixy

If this is your only line of credit (no other cards, loans etc) then actually the best thing for your credit history is to keep the card and use it to buy 1 or 2 things a month and then always pay in full each month after the statement comes. That way you pay no interest but maintain an ongoing credit history (which would be useful if you want credit or a mortgage in future).

If you were applying for more credit anywhere then having a large credit limit can be counted against you (as they'll be looking to to see if you could afford the new credit and your existing credit lines), so reducing the limit is a good idea for this reason. If you don't think you'll be making any large payments requiring the added protection then I would drop the limit to maybe £2k.