Minimum Repayments Article Discussion

edima99

Hi Martins,
Thanks for the website. It has blessed me alot. I was able to apply for Halifax one card based on your advice, I got it.
My problem is I always used credit card for shopping on the street or on the web. Can I use credit card to pay my BT phone bill? Will this be treated as purchase or cash withdrawal? They have different rates of interest.
Please let me know.
Regards,
Edima99

walletman

What would you recomend that i do i have £430 to pay on my credit card capital one i try to pay off everything i buy with it after i buy it example if i buy something for £20 i pay £20 back straight away through internet banking then if i buy or pay somthing for £60 i do the same thing and pay it through internet banking and so on and so on and also my minmum payment is sent by direct debit so at the end of the month when i get my statement i get charged purchase interest and pay that through banking is this a good way if paying and if not what would you suggest in your best normal speak not technical jargan and can you please email thanks martin.

rushey_2

I have a £4000 overdraft with LLoyds tsb (hovers around £2500) from my business which has changed within the last few months from a cheque based account, to a cash based,although I still need to pay suppliers etc. I have asked Lloyds to extend my review date until 24th Apr, and requested that they reduce the arrangement level down to £2000, which I think is now manageable. BUT
I want to get rid of this account as soon as possible, due to the high charges per month, which I think keeps the overdraft level up. If I can find a way of paying this amount off and still have access to serving my standing orders etc. that would be ideal.
I am also trying to avoid paying the £100 rearrangement charge that they levy, (much to dear.) Any advice would be welcome.
Am I on the right advice line (new user) or do I need to redirect this request.

grumbler

You definitely used the wrong place to post your question. Start a new thread (Forum Tools ) on the Budgeting & Current Accounts board. Also try to put your question in more clear way. I struggle to understand what exactly you are asking.

bigbloke45

I totally agree with Martin about minimum payments to credit cards, but it also applies to mortgages as well. If you think about it, a repayment mortgage is merely a version of the minimum payment scenario, but with a fixed payment (until interest rates change) added into the equation to produce a fixed term until the mortgage is paid off. This is entirely equivalent to paying a fixed amount to a credit card company, rather than the minimum amount each month, in order to clear the debt earlier or by a target number of repayments.

But what about mortgages? You could reduce the term, but that will increase the payment and this may not be affordable. You could "overpay" each month or occasionally. Each pound that you overpay is equivalent to getting interest AFTER TAX at the rate you are paying to your lender and makes more sense than "saving" money other than for emergencies. But there is another way;

It may be difficult to get lenders to agree, but if you can, think about asking the lender if you can repay a fixed amount of CAPITAL back each month. The amount you would owe decreases dramatically simply because you are paying less "interest on your interest" each month. This isn't the same as overpaying, but the results are amazing. It's quite easy to set up a simple spreadsheet to compare the two methods of repayment, but I suspect finding a lender who will "play ball" may be tougher!

I hope this generates some "interest". I'd be happy to do some calculations if anyone thinks it's a "goer".

norvic

I endorse everything Milarkey writes. In my case I am paying minimum repayments of 3.9% to Capital One on a lifetime balance - which seems to me good value when I can continue to invest the sum borrowed at 5.5% (and even higher using regular savings accounts). I also have a LloydsTSB lifetime balance of 5.9% which, although higher than Capital One, it assists cash flow, representing, as it does, a continuation offer after an initial 0% for 9 months .

Further, I know that MBNA has been (understandably) criticised for their minimum repayment requirement of only £5 per month regardless of the amount borrowed, but actually this is a bonus for stoozers. I have had one of their cards for years now, and yet they regularly offer mouthwatering deals: the latest being just 0.9% for 5-6 months or so using their credit card cheques (which can be made payable to oneself). Even with a balance transfer fee - in my case well under £50 - it still represents good value. And, not having to apply for a new credit card, one's credit rating remains undisturbed.