How to pay off credit card debt - which order?

maiale

OK my partner and I have fairly large debts split over 6 credit cards, a store account and an overdraft. We are soon to be able to pay off the vast majority of this debt but not all of it. However, I am unsure on the best way to do it.

So I am not sure firstly what are the debts we should look to pay off first. And secondly the amount we are paying off is the vast majority of the debt but not all of it. So what do I do with the balance that is not paid off. Should i leave the balance on one card, with a view to paying it off as quickly as possible. Or should I spread the balance out over several cards?

Just incase I have explained that badly... for example (ficticious amounts)

card 1 £500
card 2 £1000
card 3 £5000
card 4 £3000

So the above totals £9500 and say I only have £6000 to pay off, should I leave the balance of £3500 on one card and clear the other 3? Or should I spread that £3500 so that each card has a smaller amount on it to pay off?

Any ideas on the best way to tackle this, greatly received.

For other info. we are both also look to rebuild credit ratings so not sure if that has a bearing on the best way to do things.

Thank you

Tixy

What are the APRs on all the debts?

Ideally start with the highest APR and pay that off first and work your way down, leaving yourself just with the lowest APR.

Another option to consider is if any of the cards are likely to offer 0% promo rates once cleared - if they are then you might want to follow the highest first to a point but also clear a card if you think you might get a 0% deal aftewards to leave the final bit of debt a 0%. Obviously this depends on which cards you have and whether they are still open to new spending etc.

opinions4u

1. Pay off the minimum payment plus £1 on all cards (this will help enhance credit rating).

2. Throw as much as possible after this at the card with the highest interest rate.

bbfc

As said above, pay off the most expensive debt first.

Poosmate

Stick all your balances and APR's into this little toy:

http://www.whatsthecost.com/snowball.aspx

decide how much you're going to pay each month and it will tell you how much to pay off each one most effectively so you are not paying so much interest and you get them paid quicker.

Good luck

Poo

maiale

Hi guys.

Many thanks for all your help and as I said all help welcome.

Not sure I quite have my answer. I am not looking to pay minimum payments. I am looking to pay off cards completely in one hit. However one way or another I will be left with a small balance that can't be paid off. So my question is do I leave that balance all on one card and pay the others off completely or do I pay the majority off of each card but leave a small balance on each?

Thank you

Mrs_Arcanum

Store cards generally have the highest interest rates so pay these off completely & get rid.

maginot

maiale wrote: »

Hi guys.

Many thanks for all your help and as I said all help welcome.

Not sure I quite have my answer. I am not looking to pay minimum payments. I am looking to pay off cards completely in one hit. However one way or another I will be left with a small balance that can't be paid off. So my question is do I leave that balance all on one card and pay the others off completely or do I pay the majority off of each card but leave a small balance on each?

Thank you

No one said pay minimum amounts. You need to pay off the most expensive debts first so you are paying less in interest.

It would depend how much was on cards and what interest they were charging to decide whether you would be left with 2/3 cards or 1 card.

It would not be advisable to just split the amount over the cards and have all the cards left.

maiale

Hm they did, look at post 3.

Any how no point in forum banter. Many thanks for your advice. That is just what I was looking for.

Thanks

maginot

maiale wrote: »

Hm they did, look at post 3.

Any how no point in forum banter. Many thanks for your advice. That is just what I was looking for.

Thanks

No, opinions4u stated that you should pay more than the minimum first on all cards. Then pay off the cards that have the most APR to reduce the debt quicker.

As I mentioned, you may have 3 cards still left with a debt on, although you have paid the other cards that had the highest APR it is also often a good idea to pay more than the minimum on the cards left (as this helps your credit rating).

For example
Card 1 - £500 debt APR 6%
Card 2 - £1000 debt APR 11%
Card 3 - £4000 debt APR 18%
Card 4 - £3500 debt APR 22%

You have £6000 to pay debt, in this scenario.

1. Pay £1 more than minimum on card 1 and 2
2. Pay off card 4 completely
3. Use rest of money to pay off as much as possible on card 3
4. Next months repeat steps 1 and 3 until card 3 is paid off.
5. Repeat 1 and put extra cash towards card 2 etc etc

Hope this helps.

maiale

Ok fantastic info. thank you and spot on with what I was looking for.

Right now to do one of my favourite things... a spreadsheet to plan exactly what is going where and then a plan of paying the last bit off!!!

Thankyou.