Clearing credit card debt at once.

bandgeek

I am in the (very) fortunate position that my parents are able to lend me £10k (I owe £9400) which is going to get me out of my credit card hole. I have a couple of questions regarding this.


1 - Is it advisable to go in with my boots on and clear everything at once? I understand interest wise this will be the cheapest way, but would this have any future impact?


2 - By clearing this, it will leave me with £10350 of available credit, which is not ideal. I have 6 cards with varying limits from £4300 to £500, which would I be better ditching completely? I do intend on keeping a couple for emergencies/large purchases.


In order of highest limit, I have Barclaycard, Capital One, Aqua, Vanquis, and 2 from RBS.


In order of acquisition (if it makes a difference) is the 2 RBS, Barclaycard, Capital One, Aqua, Vanquis,


In essence, I want to make the best of this one chance I'm going to have to get debt free, and be in a position not to make the same mistakes again. I'd appreciate any advice, especially if anyone has done the same.


Thanks

Red-Squirrel_2

If I were you, I'd keep the Barclaycard and maybe one of the RBS cards for emergencies. Only do that if you're absolutely 100% sure you aren't going to dip into them again and end up in the same position though.

Do you have any other credit accounts? Anything you pay in full monthly?

bandgeek

I'm going to be a few hundred pounds better off each month, even paying back the money to my parents. I don't have any other credit accounts, though I do have a mortgage, car loan and an overdraft (which I'm in every month at the minute, but I hope that'll change soon)

molerat

1. Do it. It will not have a any negative credit file impact but they may reduce the limits.

2. Look at the card APRs, limits and possible offers. Ditch the highest APR cards (although my highest APR card is the one that pays me the most money !) and then see who is most likely to offer interest free spending and cash back offers so that you can make the remaining cards work for you. I am a relatively low spender and my cards paid me £180 last year !

Red-Squirrel_2

bandgeek wrote: »

I'm going to be a few hundred pounds better off each month, even paying back the money to my parents. I don't have any other credit accounts, though I do have a mortgage, car loan and an overdraft (which I'm in every month at the minute, but I hope that'll change soon)

The mortgage and the car loan are credit accounts, if you're paying those back every month then you don't need to worry about your credit file too much, you're still showing that you can make regular repayments.

Go for it, get rid, then next job is to get out of the overdraft, good luck!

PeacefulWaters

If there are monthly / daily fees on the overdraft I'd suggest that might be better cleared than one of the cards.

Your parents are making a massive gesture here. Repay their efforts by never borrowing again!

bandgeek

Thanks all for the positive comments!


I've always paid on time and never missed a payment of any of the cards, just never had the spare money to eat into what I owe.


My overdraft is for £2000, and even when I'm near the limit for most of the month I've never paid more than £32 for the month, where I'm paying £71 for the privilege of the same amount on one of my credit cards.


I'm hoping that I'll have a buffer after a few months that means I'll not get back into this situation.


It took a lot of courage to ask my parents, and they never batted an eyelid. I intend never to need to ask for their help like this again.

CLAPTON

bandgeek wrote: »

Thanks all for the positive comments!


I've always paid on time and never missed a payment of any of the cards, just never had the spare money to eat into what I owe.


My overdraft is for £2000, and even when I'm near the limit for most of the month I've never paid more than £32 for the month, where I'm paying £71 for the privilege of the same amount on one of my credit cards.


I'm hoping that I'll have a buffer after a few months that means I'll not get back into this situation.


It took a lot of courage to ask my parents, and they never batted an eyelid. I intend never to need to ask for their help like this again.

if you are paying 71 interest per month on 2,000 then your APR must be around 50%: so truely the first to clear.

even your £32 per month on 2000 is round 20% although this may be fees rather than interest

best to clear the debts by seeing the APR of each debt and paying in decreasing order of APR.

do bear in mind that an overdraft is payable on demand so you may wish to clear that before one of your CCs

good luck

victor2

bandgeek wrote: »

It took a lot of courage to ask my parents, and they never batted an eyelid. I intend never to need to ask for their help like this again.

Good luck sorting it out, and spend wisely in future!
I was in the fortunate position to be able to clear a £4K debt on DD's credit card. I only saw it because I opened a statement addressed to her, so she didn't have to pluck up the courage to ask. She was of course grateful and is paying it back to me (interest free) by standing order.
She was paying something like £100 a month, with £90 being interest, so the bank of Mum & Dad had a much better deal as she now pays the same amount to us but her credit card is clear.

Red-Squirrel_2

There's £600 left of the 10K loan after the cards are paid remember, that's a good chunk of the overdraft, and if there's a few hundred to throw at it every month it shouldn't take too long to clear it. OP can you do a bit of eBay selling, overtime at work or anything to make some extra dents into it until its gone?

enthusiasticsaver

I would clear them all and keep the one with a limit of around £1000 for emergencies and large purchases only. If you keep 2 there is the temptation to start juggling debt again. There should be no reason why you would need a card with more than a £4k limit on it unless you intend using it again which would be extremely unwise given that you have the opportunity to get out of debt. You may also want to look at clearing your overdraft sooner rather than later.