Snowball Calculator

MB1980

Hiya everyone,

I recently calculated my debts on the snowball calculator, and it seems nice and worked out, however what if the minimum payments on my debts get higher if I only pay the minimum amount on them? I have 2 credit cards on variable APR's and i've found out that if I only pay the minimim, the payment next month is even higher

piglet39

Hi MB1980

Not sure what you mean by variable APR's...

AFAIK the minimum payment due for a credit is the interest + a certain percentage of the debt (varies from card provider to card provider) so, in theory, your debt shouldn't increase (although it will reduce painfully slowly!)

Piglet

MB1980

piglet39 wrote: »

Hi MB1980

Not sure what you mean by variable APR's...

AFAIK the minimum payment due for a credit is the interest + a certain percentage of the debt (varies from card provider to card provider) so, in theory, your debt shouldn't increase (although it will reduce painfully slowly!)

Piglet

Hmmm I assumed that something was variable as i'm not spending on these cards, yet if I only pay off the minimum each month, the next months minimum is increased

Tixy

You don't have PPI on those cards do you?

What is the APR on them? if they are high APRs and older accounts then it is possible that the minimum can be less than the interest charged. Newer accounts cannot be like this.

In terms of doing the snowball I would change the % minimum payment so its higher than the contractual amount but covers at least the interest each month. That way the snowball won't work in a way that could take you over your limit.

If you cards show a monthly interest rate put that in as the ninimum % repayment. If it only shows an APR is divide it by 12 and put that in as the minimum % repayment (divide by 12 isn't quite correct but its not far off).

MB1980

Tixy wrote: »

You don't have PPI on those cards do you?

What is the APR on them? if they are high APRs and older accounts then it is possible that the minimum can be less than the interest charged. Newer accounts cannot be like this.

In terms of doing the snowball I would change the % minimum payment so its higher than the contractual amount but covers at least the interest each month. That way the snowball won't work in a way that could take you over your limit.

If you cards show a monthly interest rate put that in as the ninimum % repayment. If it only shows an APR is divide it by 12 and put that in as the minimum % repayment (divide by 12 isn't quite correct but its not far off).

Luckily i've closed both accounts down so there's no risk of me going over my limit (hopefully!!!!)

No PPI on either. One card is 14.9% and the other has to be around 20-something The youngest card is about 5 years old.

I'll have to have a play about with the snowball tomorrow. All I want to do is get myself out of debt. Never thought it would be this complicated

DVardysShadow

MB1980 wrote: »

... No PPI on either.

Then interest will be greater than the minimum payment. If that is the case you will need to pay more than the interest to make progress with these debts.

Poosmate

MB, do you mean the minimums showing on the Snowball calculator are increasing? Or the minimums on your CC statements?

If you have closed both accounts was that because you rejected new terms and conditions because they wanted to raise your interest rate on them?

If you are talking about the minimums on your snowball calc then that's how it's supposed to work. For example:

Say you pay a total of £100 per month to your credit cards (£50 to each. Assuming no charges are added for late payments or going over limits etc.). This will pay off that months interest plus a small amount of the actual debt. The interest you pay each month will fluctuate as it's calculated daily and some months have more days than others. But generally, your minimum payments will reduce. So the first month your CC minimums are £100. Next month your minimums are £99. Your snowball calc will show you need to pay (for simplicity) £49 to the debt with the lowest interest rated card and £51 to the higher rated card. But you're still only paying £100 per month. The following month your minimums are £98. The snowball will show you paying £48 to the lowest interest rate card and £52 to the highest. And so on. As long as you keep paying £100 per month (afterall you're used to paying this amount) and don't reduce that amount as your minimums come down, that's how to snowball.

It only really works if you are paying a bit more than the minimums, even if that is just £1 per debt.

Hope I've explained that ok.

Poo