New poster needing help juggling credit cards balances.

a1021789

Good afternoon everyone,

New poster, long time lurker after some advice on our situation.

Over the past two years I've gotten our finances back in order after the penny dropped that we werent in a great position. Too many nights out, hotel stays, weekends away etc etc (you've heard it all before) which the credit cards accepted nicely and we didn't give much thought. I'd been in debt entirely thoughtout university and it hadn't caused any problems as I'd always managed to make the payments.

After getting onto the property ladder without any deposit through a 75% ownership scheme our two year fixed mortgage came to an end and we sought the advice of a family friend to see where we should go from here. After jotting down the overdrafts, loans and credit card balances we were around 15k in debt and in negative equity. Gulp........:(

Anyway, two years on, living a more thrify lifestyle, we've got money notebooks, spreadsheets, formulae tracking every penny at our disposal, everything turns like a well oiled machine except for one thing, my decisions around balance transfers.

I'm currently juggling just over 10k across four credit cards and I'm at the point where one card's interest free period is about to end. I'd normally just throw the balance onto another card for another year of interest free and just suck up the transfer fee into the overall debt. Not this time though, I wanted to get some second opinions as I know this can be done better.

Below is my current picture (there is only one of each card, but rates are different on some balances)

Barclaycard - 2291.16, interest rate 0.561
Barclaycard - 193.12, interest rate 1.527
MBNA - 1018.50, interest free until 02/07/13
MBNA - 931.50, interest free until 03/12/13
Natwest - 3147, interest free until 01/03/13
Nationwide - 2720, interest free until 01/11/13



As you can see my largest amount (Natwest) is about to drop out of interest free. I've made some daft decisions in thr past in this area (low interest on Barclaycard for example) so before doing anything rash, wanted to run my plan past more experienced eyes.

- I have a 12 month 3% balance transfer offer from MBNA which I was going to use to transfer the Natwest and Barclaycard balances to. Roughly a £150 transfer fee.

- Once done, I have around £300 - £350 per month to throw at these debts, most of which would go at the MBNA balance, paying just the minimum on the Nationwide.

- I have assumed that as I will have three balance transfer dates on the MBNA card, the oldest one (02/07/13) will be paid first when paying my £300 - £350????? meaning I'd have paid the outstanding balance before 02/07/13 arrives?

Thank you for reading,
Sam

Also - In the past, I've been keeping my credit cards in the hope there will always be a 0% offer when I need it, is this wise?

Tixy

Hi and welcome to the forum.

Firstly are you currently 'snowballing' your debt repayments, that is paying the minimum off all cards except the one with the higher APR or the shortest 0% period left and paying as much as you can to that card? would your next payment above minimums be to pay off the £193 on the bc?

Have you seen the snowball calculator? I think you might find this useful as you can use it to compare different scenarios as to how much interest you will pay overall (remembering to add in any BT fees to the balances in any alternate scenarios - you also need to use APRs not monthly interest rates). Have a look here - http://www.whatsthecost.com/snowball.aspx

You mention other cards - do you have any old cards still open with nil balances? - if so have you rung round them to see if any can offer a better deal than the MBNA one - cheaper fee or longer 0% period for example.

a1021789

Thanks Tixy.

I've heard the term snowballing in the past without really knowing its meaning - I'll check out the calculator to see if it makes sense.

I've never really had a solid action plan for paying them no, I'd normally plump for payments 10 - 15% above the minimum, maybe just the minimum on tight months. I'd probably only start thinking about paying more off one card a month or two before I have to transfer the balance out. Typing this down makes me realise how backward I've been doing this for the last two years.

I only have the four cards, the parting question about keeping the cards referred to times when say for example I'd transferred a balance out and the card would sit at zero until an offer came along.

Tixy

Snowballing is about minimising the interest paid overall, and when the most expensive debt is repaid you 'snowball' the monthly payment from that one and add it to the payment to the next most costly debt.

You could also consider trying to apply for a new card which may have a better deal than the MBNA offer e.g. Halifax has 25months for a 3% fee, Lloyds TSB have 21months at 1.5% fee.

That does depend on your credit history of course - but might be worth an application somewhere? best deals are here http://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards

a1021789

According to the snowball calculator, in my current situation, it seems that my balance transfer idea would reduce the amount of interest paid overall by £400.

I had dismissed applying for another card. partly due to the fact I was knocked back by Virgin the last time I applied for another, so have just been making do with what offers I had on the current ones. However on this occassion, the Lloyds 1.5% card seemed to good to pass up, so I applied and was successful. Woo!

I haven't put all the detail back into the calculator, but being as I would have been better off doing my original plan of 3% fee for 12 months 0%, a 1.5% fee for 21 months is a no brainer. I've transferred out the entire Natwest balance and a good chunk of the Barclaycard balance. This will be my minimum payment, while I throw the remainder of the money at the card which the calculator tells me each month.

Thanks again Tixy - you're a star.

AFK_Matrix

I would think if you have managed to transfer the Natwest card over and a good amount of the Barclaycard then you would be best paying off the remainder of the Barclaycard as that has you paying an interest amount. once this is gone then put the money towards the card with the shortest interest free period on it.