Savings Kick Starter Diary

ALM2013

Although 99.9% of people would disagree with what he is doing, it's what I am doing aswell, although mine has a couple of months 0% left. If i clerks it with all my savings, some stupid emergency will pop up and il need to use the card again.

Remember, this is a place for advice although he might want to do it his own way which feels financially secure for him.

Good luck everyone

jimjames

Eco_Miser wrote: »

:wall:That goal doesn't make sense if it's costing you money! It doesn't make sense anyway, because short term (until payday) borrowing on a CC is usually free.

Absolutely. It makes no sense to pay out 20% interest on debt but receive 1% on the same amount of savings - or even 0% if it is cash under the bed.

This is a money savings tip site and it really is crazy to keep expensive debt when you have very low rate savings that could pay it off. Having a 0% card is different but paying down expensive credit card debt should be a priority before saving.

It does raise another point though - if once cleared the credit card balance builds up again it is showing that spending is more than income and that is something that needs to be addressed long term.

block10

I suppose the OP is establishing a stable credit history prior to a mortgage application in the longer term.

I would consider calling the credit card Co and pushing for a lower APR % rate and also consider applying for a 0% transfer card.

Jonesy135

Sorry guys, i know it must be frustrating, and feel like your banging your head against a brick wall with me. but my justification is this:

for the past 2 years ive been putting everything i have onto paying off my credit card and overdraft each month, spending as little as possible and putting every last penny into paying off debt (not just mine, also my ex's)

however, doing that hasn't left me with any surplus to cover the big annual expenses such as car insurance, insurance excesses etc now because of this i know that i need to forward plan which is what im now trying to do

i know its costing me money to stay on my CC now but im going to need a new clutch in the new year (circa £400 im allowing for) so if i pay of my CC today yes i don't pay interest on it, but come the new year im going to have to put at least 400 quid on it... then by the time that comes off ill have my car insurance to pay which will be around £700 which, because i have no savings, will go on CC.

So is it cheaper to pay off my £1075 over the course of 3 or 4 months, and then keep it cleared, or is it cheaper to keep lets say an average of £550 on it for a munch longer period of time?

From what people are saying i guess my thinking is a bit backwards...
i know this approach will cost me money in short term but its the only way i can think of clearing the debt and im thinking in the long term itll be cheaper in the long term because the type of purchases i put on my CC are too much to pay off at pay day so i would have to pay interest on it anyway:(

Jonesy135

But on a happier note (for me at least)

house deposit now stands at ≈ £10,120.00
Cash savings have dropped to £600.00
and my CC is down to £874.60

Jonesy135

And another little update - another £20 off the credit card

Eco_Miser

Jonesy135 wrote: »

Sorry guys, i know it must be frustrating, and feel like your banging your head against a brick wall with me. but my justification is this:

for the past 2 years ive been putting everything i have onto paying off my credit card and overdraft each month, spending as little as possible and putting every last penny into paying off debt (not just mine, also my ex's)

You've been doing well. Keep it up. Pay the card off before those big annual expense, then pay for them on the card, and pay the card off as quick as you can.

Jonesy135 wrote: »

however, doing that hasn't left me with any surplus to cover the big annual expenses such as car insurance, insurance excesses etc now because of this i know that i need to forward plan which is what im now trying to do

i know its costing me money to stay on my CC now but im going to need a new clutch in the new year (circa £400 im allowing for) so if i pay of my CC today yes i don't pay interest on it, but come the new year im going to have to put at least 400 quid on it... then by the time that comes off ill have my car insurance to pay which will be around £700 which, because i have no savings, will go on CC.

So you could pay for the clutch in cash, but have >£800 still outstanding on the CC, or have already paid £500 off the card, so £300 left, plus the £400 clutch added to the card. You're better off by the interest on £500 for a month or more plus the interest on £100 for however long it take to clear the card.

Jonesy135 wrote: »

So is it cheaper to pay off my £1075 over the course of 3 or 4 months, and then keep it cleared, or is it cheaper to keep lets say an average of £550 on it for a munch longer period of time?

Put the figures into a spreadsheet and work it out for yourself, with the actual rate you are being charged, and the amount you will pay each month.
But assuming 20% APR, and everything in whole months:

• paying off £1075 over 3 months would cost £36,
• paying it off over 4 months would cost £45,
• paying off £600 at the same rate would cost £17 over three months,
• starting with £600 and paying 3% of the balance each month would give you an average of £550 over a year, would cost £112, and you'd still be owing £517.

Jonesy135 wrote: »

From what people are saying i guess my thinking is a bit backwards...
i know this approach will cost me money in short term but its the only way i can think of clearing the debt and im thinking in the long term itll be cheaper in the long term because the type of purchases i put on my CC are too much to pay off at pay day so i would have to pay interest on it anyway:(

Not if you have enough savings to pay the CC in full at payday (but not enough to buy the item outright).
Either way, you have to pay the cost of the item, your way you have to pay more interest as well which makes paying it off even harder.

Ideally, a credit card should be treated as a charge card, and the balance cleared each month.

I hope that makes sense to you.

Jonesy135

Thank you for showing me some numbers it really helped put things into perspective.

Ive done some of my own sums this evening (for about the 7000th time)

im going to pay off my CC with my £580 cash next time i go near my bank. (Break through!)

leaving around 270, which i will hopefully be able to pay the majority off just before next payday if christmas goes to budget!


You've gotten through to me finally! and its only taken you a week

im just a bit nervous at having no cash for an emergency!!


I really do appreciate the time you guys have spent explaining and reasoning with me!! its made me want to crack on with saving!


Oh and my ultimate goal regarding my CC is to use it as a charge card, for the added protection you get when paying for things, and it pay it off immediately (which is, ironically, what i said when i first applied for it!)

Eco_Miser

By George! I think he's got it!:j:j


Don't worry about an emergency, if one happens, pay for it on your card, then pay it off as quick as you can. If not, start saving, or pay the car loan early.

cathybird

Jonesy135 wrote: »

Thank you for showing me some numbers it really helped put things into perspective.

hi Jonesy135, I find the MSE forum absolutely worth its weight in gold for the way it helps to get money in perspective. It really helped me get debt free a while ago and is now helping me with my savings plan too. Well done you for everything you have achieved so far, too.

Oh and my ultimate goal regarding my CC is to use it as a charge card, for the added protection you get when paying for things, and it pay it off immediately (which is, ironically, what i said when i first applied for it!)

My one concern here is I think a lot of people think they will use a credit card this way but it is too tempting to use it for other things and they end up piling on debt on it (as I did). I've got rid of all overdrafts and credit cards and hope never to have either of those things again.