I'm confused about the best thing to do with credit card.

longbowgilly

Hi,

First off I am English but moved to Australia in 2006 so my figures are going to be AU$, but hey the numbers will do.

We are trying to get rid of our debt this year, we are snowballing and things are going ok but I need some advice about the best way to tackle our credit card.
Currently it has a $2000.00 limit and we use that for food, fuel,eating out, coffee etc over the month and pay it off every month.
What I am wondering is could we actually pay it off over say 4 months? Would we actually be doing the right thing, I know this sounds stupid but I think it would be a good idea to just clear it and NOT use it except in emergencies, but obviously we can't afford to pay it all off AND still get our food and fuel. Then we would only be using our bills account and one that we don't use much but could put the money left over from NOT paying all of the credit card off in and just survive on that.
I am not sure that I have explained myself well at all but we really need to get our debt paid off as soon as possible.
If anyone can understand me and wants more info just let me know.
I really appreciate the fact that this forum exists so I can ask this sort of question!:grouphug:

CalumHeath

I know exactly what you're saying.

There is no problem doing that but you will pay for the privilege through the interest you pay - that's how credit companies make their money.

If you're struggling, have you thought about not spending what money you do have on eating out and coffees? It's a sure-fire way to start saving money.

andyfromotley

Hi,

the way to do this is to spend less each month, say 25%. Put the 25% you havent spent aside. After 4 months you will have enough not to use the credit card for that months spending and you wont have paid any interest on the card.

enthusiasticsaver

It is feasible and indeed many years ago when money was tight we stopped using credit cards due to the payment (we always paid in full) swallowing up our monthly salaries leaving us very little to live on unless we used the credit card. What we did was looked for economies and tried to reduce the amount we spent on the card bit by bit by spending from our current account until that ran out so each month the bill was a little lower until it was gone altogether.


Can you do a balance transfer to a 0% card then pay it over a number of months and that way you are not paying interest? You may have a BT fee though.

Sanctioned_Parts_List

You've been through the process before, but when was the last time you did a little SOA for yourself to see where waste was creeping in? If your budget has balanced before and isn't now, then some aspect of your spending has increased slowly and you haven't noticed until the CC repayments become onerous.

theoretica

longbowgilly wrote: »

Hi,
Currently it has a $2000.00 limit and we use that for food, fuel,eating out, coffee etc over the month and pay it off every month.
What I am wondering is could we actually pay it off over say 4 months? Would we actually be doing the right thing, I know this sounds stupid but I think it would be a good idea to just clear it and NOT use it except in emergencies, but obviously we can't afford to pay it all off AND still get our food and fuel.

If you are using the full $2000 you are suggesting paying off $500 a month. To do this without paying interest you pay it all off as normal, then only spend up to $1500 the first month, $1000 the second, $500 the third and nothing the fourth month.

bearcat16

I'm afraid I don't understand the logic here.

Buying your monthly necessities like food and petrol etc on a credit card, then paying it off at the statement due date, gives you a months worth of spending cash flow in your bank. It doesn't cost any more or any less than using a debit card or paying cash.

If you stop doing this, you reverse the cash flow gain and will have a month where 2 lots of spending is due. (IE the credit card bill from last month AND the expenses for the current month)

If you pay the bill on time there's no interest to pay, so I just don't see why you think not using the credit card will save money?

when money was tight we stopped using credit cards due to the payment (we always paid in full) swallowing up our monthly salaries leaving us very little to live on unless we used the credit card.

Again, I don't see how this saved any money?

longbowgilly

theoretica wrote: »

If you are using the full $2000 you are suggesting paying off $500 a month. To do this without paying interest you pay it all off as normal, then only spend up to $1500 the first month, $1000 the second, $500 the third and nothing the fourth month.

This sounds like a great plan!
It's payday this friday so I will pay it off as usual but will limit it to $1500!