Which card to pay off first??

neilh_3

Hi,

First of al thanks to Martin and the rest of you guys on this forum for providing such useful information which has allowed my fiance and I to move all our money about and hopefully save hundreds of pounds a month of interest.

We're both quite number savvy but are still stuck on which balances should be paid off first if we have any extra cash (all minimum payments being met at the moment).

So for all you number crunchers I've listed our balances, APR's and associated time frames of offers and would ask for any help in suggestions about which if any should be paid off before the others??

£2300 Barclaycard at 0% until August 2005 (2% min repayment)
£5850 capital one at 3.9% Life of Balance with ~4 months left where more can be added at same APR (3% min repayment)
£4000 Egg card 5 months at 0% (2% min repayment)
£5000 BoS One card 6.9% Life of Balance (2% min repayment)

and we have another egg card (£0 balance) with 0% anniversary offer starting in Jan/Feb and another card with £0 balance which we can use to transfer the money between egg cards when the time comes.

So thats where we're at............any help much appreciated.

Cheers

NeilH

Galstonian

1. You want to pay off as much as you can as quickly as you can.

2. Always pay off the most exepnsive first.


Without moving debts around you should work at them in this order:
BoS 1
Cap 1
Egg
Barclays

However, you might want to move debt from BoS 1 to Egg for example to take advantage of 0%. This is only good if you can either pay of the Egg bill at the end of 0% period OR transfer it to a card charging no more than 6.9% (well actually it could be slightly higher than that but lets avoid complex formula) I am assuming you can still transfer debt to Egg, this may not be the case if it is an annual 0% rather than introductory. I can't recall the small print for Barclays but ISTR there was plenty of strings attached.

So the question becomes how much more can you pay off over and above the minimum?

I assume you don't have savings either?

neilh_3

Thanks for your quick reply.

I probably should have said that these cards are now maxed out so cannot move more to 0% egg from BoS for example. My empty egg and other BoS M/C have combined limit of £10k for moving money between cards if needed and theres always the cahoot flexible loan with £11k limit from which I've just moved all my balances to the other cards!!!!

In answer to your questions:

Depending on other outgoings possibly a few hundred pounds might be available each month.

Savings.........i wish.........unless you count the 42p i have in my Egg savings account which i can't take out unless i put more then £10 in to take the whole lot out.

It's unlikely that we'll be able to pay off the rest of the balance in full when intro offers end therfore does it make more sense to pay these off and clear the balance so there is nothing left to go back up to say 13.9% when the offer ends or pay off the 3.9 or 6.9% (which will have mimimal interest less then the interest of the other cards if balances go back to 13.9%)!!!!!!!!

Cheers

NeilH

Galstonian

I assum you worry that further 0% credit will be unavailable either in general or specifically to you?

Anyway, looking at your choices...

You can overpay the 0% cards.
This saves you no interest but at least your debts are reducing and come the end of the 0% intro periods you won't have to pay full interest on such a large amount.

You can overpay the non-0% cards.
This saves interest in the short term but come the end of the 0% intro period you have a larger amount to pay full interest on.

Alternatively you could do neither. You could save. Normally I would not suggest doing this but I think you may have a special case. If you feel you would be less inclined to save rather than overpay or you would withdraw the money then I'd urge you just to overpay the 0% cards. Basically you could put off having to decide for a while and can make approx 5% interest (e.g. 5.35% with A&L if you don't pay tax on interest, if you pay tax then look for a cash ISA). Closer to the time the 0% cards require repaid, appy for further 0% credit. If you get it then roll debt onto that and either keep saving or use your savings to reduce the interest bearing debts.

If you have not already done so it may be an idea to get your credit history files from Equifax and Experian (£2 each by post) and ensuring all is accurate.

Milarky

Along the lines of what Galstonian is saying, your best bet is probably to keep applying for new offers as the old ones near their end.

BTW, cahoot's credit card can be used to add an extra month or so to an offer, provided you had the cash ready to repay a balance. They do the same interest-free period for BTs as purchases but only provided they can take the full balance by direct debit on the due date [something to bear in mind for later perhaps?]

At least you can 'clear' debt in the short term from individual cards, which may allow you to benefit from any 'life of balance' offers [I'm thinking of the Barclaycard] after promotional rates on these cards end. If you think about it, there is every reason to move to 'consolidate' your debts around 'LOB's, since they are entirely flexible with regard to making  repayments / overpayments.

Now, If all your debt were at 6.9% today, say, then you could move back into 0% deals in a gradual way - simply using the 6 or 9 months to 'carry off' a bit of this debt each time. For longer lasting benefit, you would be substituting lower rate LOBs for higher rate ones [eg 4.9 ?] once you got this rate down a bit futher you could concentrate on using 0% deals to 'carry off' the remaining debt a bit more quickly...

So perhaps your priorities should be something like..

1) Maximise potential 0% offers/repeats [avoiding standard interest rates]

2) Consolidate some of this 'rolling' debt into new LOB offers instead [at median rates of interest]

3) Further consolidate onto improved LOB offers [lowering average rates]

4) Use ongoing 0% offers to 'offset' most expensive remaining debt

Gal,
I've found this helpful when reading your replies.  ;D Now I'll have to use some obsure abbreviations myself!