Best plan of action?

QuietOne

Hi guys,

This will probably be more in-depth than it needs to be but I want you guys to have the full picture and best plan of action.

I have two credit cards and one on the way.

I'll round the balances up to the nearest pound to make it easier.

CapitalOne: £1,674/£1,850 @ 34.1%
Metro Bank: £1,127/£1,200 @ 13%
Barclaycard Platinum: £0/£1,000 @ 0% on BT for 36 months

At the moment I'm paying minimum payment on the first two which is no good.

My income isn't great but my outgoings ain't that bad either but I'll give you lot a brief overview:

Income: £1150-£1300 p/m depending on workload
Rent: £500 p/m
Cap1: £60 (min payment)
Metro: £45 (min payment)
Mobile: £47
Boadband: £39
Luxuries/other: £100

I have a company vehicle and fuel card which I can use for personal use so I don't have to worry about fuel. Last couple of months I've managed to put £400 in savings each month.

My initial idea is to use the Barclaycard to transfer the majority of the Cap1 balance which would reduce it to around £700 mark and then pay it off monthly then a part of me was thinking of splitting it between cap1 and metro.

My other dilemma is, my next pay I transfer £200 to my savings so it's rounded up to £1,000 and the remaining spare cash will be split between the cards and from then on just focus on using my spare cash from future pay to reduce the cards.

I'm not sure which way is the best way of going about this hence the detailed post and get your views on what you would do in this situation.

Thanks for reading

andyfromotley

High quiet one.

BT the max away from your cap one card.

Pay the minimum on metro, throw every bit of spare cash at the cap one (it sounds as if you have enough in savings to clear this completely along with the BT) The interest rate on this card is awful. It makes no sense to pay anything else other tham the minimum until you have cleared the cap one.

Then throw every bit of spare cash at the Metro Bank, then the barclaycard.

This method, paying the minimum on everything except the highest interest is called snowballing, and is the most effective way to clear CC debt. there is a calculator but you dont need one just follow the above steps.

Well done on getting a grip on this. When you have cleared them, CLOSE them to avoid running up credit again.

QuietOne

Thanks for the reply, andy. you make a lot of sense and I will do it in that order, is it selfish of me not to use my savings towards clearing cap1 card? The reason being as I want to keep that in case of anything happens but also love having money.

But I'll do what you suggest, BT as much as I can from cap1 and next pay day which is next week, I'll pay minimum on metro and the rest will go on clearing cap1.

andyfromotley

QuietOne wrote: »

Thanks for the reply, andy. you make a lot of sense and I will do it in that order, is it selfish of me not to use my savings towards clearing cap1 card? The reason being as I want to keep that in case of anything happens but also love having money.

But I'll do what you suggest, BT as much as I can from cap1 and next pay day which is next week, I'll pay minimum on metro and the rest will go on clearing cap1.

No its not selfish, its extremely sensible to have saving of about £1000 in an emergency fund even whilst in debt, so it is actually the 'proper' way to do it.

I just hate that interest rate on the CAP ONE and it would make me feel ill to pay that sort of interest knowing i had money in the bank to pay it. But i dont hate your proposal whichever way you do it.

QuietOne

andyfromotley wrote: »

No its not selfish, its extremely sensible to have saving of about £1000 in an emergency fund even whilst in debt, so it is actually the 'proper' way to do it.

I just hate that interest rate on the CAP ONE and it would make me feel ill to pay that sort of interest knowing i had money in the bank to pay it. But i dont hate your proposal whichever way you do it.

You are right though, Cap1 interest rate is sickening. My main focus will be to clear that, hopefully pay at least £200 p/m towards it.

Thanks for your help and I hope you clear your debt soon too

Dobbibill

I agree with Andy - EF is important so rounding that up to £1000 is exactly the right thing to do otherwise when a curve ball is thrown at you the temptation is to go back to using credit for this.

With a £1000 credit limit on Barclaycard, this will allow you to transfer approx £950 to it (95% of the credit limit to allow room for the BT fee)

Rule 1 - set up a DD to make minimum payments to Barclaycard - this will prevent ever missing the payment due date and incurring a charge, late payment marker and loosing your BT offer.

Then make minimum payments to all other CC's with overpayment going to Cap 1 first.

If you are ever unsure which way is best/most cost effective way to make overpayments use this link, a snowballing calculator.

Using the £400 savings plus the minimum payments you already make each month, you should be debt free in approx 6-7 months.

All the best

DB