Paying Off 0% Debt

Pepperoni

Once we have cleared car loan, we will only be left with our credit card debt which is at 0% for another 25 months. I'd like to start throwing money at it immediately - even though my bank account earns 3% interest.

Does that make sense? I feel like on one hand, save the money in the bank account, earn the interest - pay the credit card. BUT I'm nervous the amount we were saving towards the repayment in full would decrease etc when willpower fizzled and so on.

My head just wants rid of it. I think (yet to discuss) OH will think its better off in the bank account and paid in minimum instalments then a whack sum as the 0% ends.

I just can't wait to be actually 'debt-free'!

enjoyyourshoes

If you pay off CC at £229 pm it will be paid off after your 25 months 0%. Do it by SO or DD

Pay off bank loan at 7.8% next

Overpay Mortgage if your provider allows without penalty. You will save £ TONS's of interest and pay off ahead of time too.

Also Pension saving

Critical you start considering compound interest 'working for you' in savings rather than against you in Debt.

So:-
1. Have a clear objective (specific, measurable, achievable, realistic & time-bound)

2.Understand your total annualised costs & savings (to meet your objectives) (i.e. do a budget or similar) & ensure this is LESS than incoming money. (if not do a review to allocate LESS than income)
(DONT forget to include Christmas, Holidays, Birthdays, Savings, clothes etc as well as the boring stuff)
Consider reducing Coffee and putting that saving into interest bearing account, you'll be surprised how much it adds up over the year

3. Break budget into two part (part one: monthly costs) (part two: 1/4ly ; 1/2LY & annualised bills. This annualised £'s should be divided by 12 to produce a monthly cost to save for these bills. Can do a cash flow to ensure monthly savings pot has enough £ to pay allocated Bills on the estimated months they become due) Include Christmas, Birthdays & clothes

4.Produce a monthly reconciliation which has your income LESS all your costs (including the monthly savings described above), Cash withdrawals, monthly DD & SO, cheques cashed, credit card purchases & savings (linked to your objectives). Do this reconciliation daily and ensure you spend LESS than income.

5. If you dont deduct credit card payments off your monthly income then you will not have the £'s to repay and thus end up in DEBT.

5. Put your monthly savings into a high interest account and track allocated savings against costs. Also DONT PAY insurances by monthly credit agreement pay them annually.

6. Get online access for your current and other accounts so you can see your separate reconciliation is accurate and moving monies is less hassle on line

7. Produce Excel docs to assist or you can do all these manually too

longtermplanner

Pepperoni wrote: »

My head just wants rid of it. I think (yet to discuss) OH will think its better off in the bank account and paid in minimum instalments then a whack sum as the 0% ends.

A tricky discussion to have. OH is right that you will be better off if you save up and then clear it but it only takes a few moments of weakness for you not to be able to clear the 0% deal. This is how banks make money, from borrowers not paying off the balance!

I think the interest you 'lose' by doing it the safe way and paying it off every month is probably going to be about £50 after tax. For me that wouldn't be worth the risk.

PinkPoppies

I agree with longtermplanner, the amount of interest you will earn while saving up the owed CC balance would not generate a significant enough amount of 'profit' to make it worth the risk. Get rid of the CC!

Personally I find it much more straightforward and clear cut to chip away away at a CC balance, rather than try to save in a busy current account with a constantly fluctuating balance.