Pay off 0% cards or start saving?

PollyOnAMission

I am wondering what best to do in my situation and would value any input.

I have two credit cards, both at 0%. The balance on one is £1,600 and the balance on the other is £1,700. I have no other debts other than student loan and mortgage but I'm not too worried about paying them off quite yet.

I have budgeted repayments (£110 on one card per month and £160 on the other) and set up direct debits so both cards will be paid off before the 0% rate ends. I am strictly budgeting my living costs elsewhere and have spare cash left at the end of each month.

My ultimate goal is to save up a deposit in order to move house. My question is... should I be paying any leftover money towards my credit cards in order to clear the debt sooner, or should I be transferring it to a savings account? I don't have any other savings at the moment because I used them to clear my overdraft.

It would be nice to have a bit of a rainy day fund for emergencies/big costs eg car servicing without having to use credit again, plus it all helps towards a deposit. But I know debts should be paid off before saving...does this also apply to 0% debts? Especially when considering I might be applying for mortgages at some point that will ask about monthly credit card commitments.

Thanks in advance for any advice

superpennycounter

I know what you mean....

What I have been doing is paying half to my credit cards (which are both 0% interest) and half to my savings.

I know some may say "not to save when you have debt", but it is nice to have something saved no matter how small.

bubble32

I think it depends how good you are with keeping on track of your finances and your credit rating.

How long is your 0% last for ?

You could credit card tart : use your credit card to top up your savings , but would recomment to be very-very careful not to get caught out by having to pay interest on your credit cards.

What about an ISA ? Great starting point right now and better then a savings account.

I have both credit card and saving at the moment and am also saving for a deposit.

PollyOnAMission

Thanks for the replies.

I keep track of my finances meticulously (I have an app on my phone on which I record all transactions for all my accounts) as of January this year! One of my 0% deals ends in April next year and one ends in October next year. My current monthly payment setup will clear them at least a month before the rates end.

Rather than tarting I would prefer to get these two balances paid off, and any other credit card spending between now and forever be repaid in full. I have started spending on my cashback card and repaying in full, but the cashback rate on that is low now as I've had it a while. Once I've got the two 0% cards cleared I aim to close them and take out a competitive cashback card for all spending, repaying in full every month.

I need to look into ISAs. At this point I'd need something I could access easily, preferably with quick transfers between it and my Natwest current account. Does such a thing exist?! Then once the debts are cleared I can take out a "proper" ISA and save like I mean it

charlyze2

well seeing as your c/c are on 0% and they will be cleared before the offer runs out then it makes more financial sense to save any surplus money in a savings account

im with natwest and i have an instant access isa. take seconds to transfer between the account.
not sure of the rate though.

DVardysShadow

PollyOnAMission wrote: »

I need to look into ISAs. At this point I'd need something I could access easily, preferably with quick transfers between it and my Natwest current account. Does such a thing exist?! Then once the debts are cleared I can take out a "proper" ISA and save like I mean it

ISA's are not good for emergency fund type saving, because what you take out, you cannot put back in. Once you have an emergency fund, your choice is between ISAs and overpaying the mortgage you have. Depending on your mortgage, the mortgage may be the best place to put spare cash.

PollyOnAMission

Natwest instant access ISA sounds like it could be a good compromise for me for now. I'm not sure I'd be putting enough in to worry about not being able to put out back again, at least not yet.

I am interested in the extra mortgage payment idea, however it's a bit complicated at the moment because I own the house with my brother. I'm pretty sure he can't afford to make extra payments at the moment so I might have to leave that idea until I've moved and have a mortgage on my own.

Once I've paid off my cards and have an easy access emergency fund I'm going to open a decent ISA for some serious saving.

Sharon87

If you have the willpower then you can pay the minimum off the credit cards, then use the rest of what you pay towards your cards and put it into a savings account and earn interest on it. Then whatever spare cash you have put into a separate savings account.

cutestkids

I would save it as you have already set up payments to be made to cover the credit cards and they will be clear before the 0% deal ends so there is no real benefit to paying them sooner.

At least if you put the cash in a savings account you will earn a little interest (not much in the current climate but better than nothing)

PollyOnAMission

Thanks for the advice

That's decided: I will put extra into savings rather than pay off the cards.

Thanks!

PollyOnAMission

I have now taken out an easy access cash ISA into which I will put any leftovers just before payday. Sorted!