Question re 'snowballing'

GillianY1

I have just taken out a Creation Mastercard with a 0% for 12 months offer (jumps to 19.9% after 12 months) and transferred my Barclaycard balance of £4000 to it.

I have a couple of other credit cards (4k on Virgin at 6.9%, 3k on Barclaycard at 16.9% and 2k on Bank of Scotland at 15.9%) I used the makesenseofcards snowball calculator to find out how quickly I could pay this off by paying an extra £250 above the minimum payments and was surprised to see it said to pay the extra money into the 0% Creation card each month.

I thought the point to snowballing was that you pay off the debts with the highest APR first?
Apologies in advance if this is a silly question!

smithers1981

when you typed in APR for credit cards i can only assume you put 19.9% instead of current rate of 0% thus making it most expensive card when for 12 months it will be the cheapest.

Always pay off highest interest rate first.

GillianY1

I did type in 19.9% but there is also a place for introductory APR and a date it finishes (therefore I entered 0% ending July 2013)

When you look at the detailed monthly payment breakdown, its shows interest amount as '0' but still allocates the overpayment to it. Perhaps it is because after the 0% offer ends in 12 months it will be the highest APR and will still have a balance on it?

[Deleted User]

It has probably suggests this because your other debt will not be cleared by the time the introductory rate ends, thus you will be liable for the non-introductory rate.

And it certainly doesn't take into account any option to transfer other debt to 0% either now or at any point in the future.

Personally, I would pay the overpayment that you have available towards the debt that is CURRENTLY costing you the most in interest (ie Barclaycard). Revise if and when you transfer debt to other (cheaper) cards or any rate change is impending.

HTH

D9

flyinggiraffe_2

Thanks for posting - I've been looking at the snowball calculator today and had a similar query

MummyDrusilla

Mine does the same. I believe it's cos it gets you to pay it off before the 0% apr finishes as when this finishes, it'll be the highest rate. So it'll be better for you to get rid while it's free interest.

However, I have ignored mine and gone to the things that are actually currently costing us more as we're pretty certain we'll be able to balance transfer when the 0% comes to an end.

GillianY1

Thanks for the replies. I thought this would be the case but just wanted to double check. I think I will pay the extra into the 16.9% Barclaycard then revise my snowball in 12 months when the 0% offer ends.