Need advice on how to best tackle credit card debts 29 June 2015 at 11:35PM edited 30 November -1 at 1:00AM in Debt-Free Wannabe 13 replies 1.3K views

Sareybox

Hi,

This is my first post here so please be gentle

I have £22,000 in credit card debt + a £2,500 overdraft that has mounted up over the last 2 years, I have finally had my light bulb moment and I'm determined to clear this debt. I've worked on a budget, cut down my expenses and I reckon I can afford to pay off £900/month towards these debts.

The credit card debt is spread over 7 cards on 0% balance transfer deals and my overdraft has a £1/day charge.

I'm not sure what to pay first! The 0% deals are varying lengths from 4 to 19 months, if I pay off the overdraft and then the shortest 0% deal first and so on I won't pay off the debts before the interest free periods end.

Do I do this anyway, try to balance transfer some more (I'm not sure I should / could get anymore credit cards!), or do I pay minimum repayments and put the money in to a savings account to pay off as much as I can when the interest free periods end?

It's boggling my mind just a bit and I'd appreciate some advise.

Here are the amounts and the interest free periods:
£2,572 - 4 months
£3,323 - 6 months
£6,260 - 8 months
£2,209 - 14 months
£644 - 19 months
£3,249 - 19 months
£3,877 - 19 months

Thanks in advance for any help!

pineconesjay

1. Putting the money into a savings account isn't going to net you much interest, and if you're not so good with willpower, seeing that money might mean that you end up spending some of it, negating any interest you might earn.

2. Pay off your overdraft ASAP. Then just tackle the credit cards one by one, going by shortest time til fees kick back in.

3. If it looks like you won't be able to pay off the balance before the interest free period ends, could you transfer the balance to one of the 19 month ones?

pineconesjay

Short and sweet of it:

Aside from tackling the overdraft immediately, the next top thing on your list should be to transfer the first three debts to one of the 19 month cards. Then start paying the 14 month one.

Sareybox

Thanks for your reply, there isn't enough credit on the 19 month cards to clear the first 3 balances, I guess I could transfer as much as possibly though and possibly ask them to up the credit limits?

pineconesjay

I wouldn't recommend upping your credit limits.

Just done some quick maths and I'd say if you can't transfer them, just tackle them in the order you have listed above. You may not pay them off before the interest kicks in, but it isn't a great amount, and it's not like they all start accruing interest at once... you might pay $20/month in interest (if you can't transfer the balance) but you're getting a headstart... some people don't even get to have any respite from interest fees (i.e. me)

Sareybox

Thanks for the input :-)

remorseless

Sareybox wrote: »

Here are the amounts and the interest free periods:
£2,572 - 4 months
£3,323 - 6 months
£6,260 - 8 months
£2,209 - 14 months
£644 - 19 months
£3,249 - 19 months
£3,877 - 19 months

What is the min payment during interest free period? What's the interest rate after the interest free period? what's the limit on each of those cards and can you credit transfer?

Fireflyaway

I know most money saving people would say tackle the one with the highest interest first but I like the snowballing method. Have a look on youtube at Dave Ramsey.

Basically you pay off the smallest debt first. That way its easier and boosts your confidence. Any repayments you used to pay on that then gets rolled onto the second debt and so on.

Jo3y83

I agree with this method completely Fireflyaway and that is how I will be tackling my debt also!

andyfromotley

i like the Dave Ramsey method too. However not in this case.

Pay them off as advised the ones with the shortest 0% interest rates. If you get ahead of the game put it toward the highest. Only exception is if any of them are super high interest rates after the 0% you may want to tackle them. In this case interest is your enemy. Avoid it.

Well done on sorting it.

remorseless

it is a big amount! Usually during interest free there's still min payments...

Assuming it's 3% it's a bit of juggles to get going for the first cards!
My advice would be to put data in a spreadsheet to start see the simulation... Month1 payment is min payment of 3% + 253.98 which is what's left from 900-all min payments...