Savings to pay off debts

Whiteknight

I feel very silly posting this when I have seen some of the debts that others have here and deep down I guess I know the answer to my own questions.

Basically I owe about £1000 on a credit card, which has floated around this amount for over a year with just the minimum payment being made, this time last year I also owed a similar amount on another credit card - again I was only paying off the minimum amount each month.

I was never like this and used to pay off the balance in full each month but I suppose I had some unexpected bill (guessing with the car) and things got out of hand. I moved in 2015 and my household expenditure increased and I was finding myself dipping into my various savings accounts (which I had set up so that I would be in a position to not have to rely on the credit cards to pay bills and in theory that was working as the credit card balances were not increasing.

In May I handed over both my credit cards to a trusted friend to keep hold on as I was not able to trust myself that I would not spend on them. At that time I used some of my savings to pay off one of the cards in full and increased the minimum payment on the second I and had promised myself that I would use further money in savings to reduce the second card. That never happened and I find myself in a positing where I am questioning if I should use money I have in an old ISA to pay this £1000 ?

My fear is that once the money goes from this ISA I will never be able to replace it or will dip into it for other things and will have no emergency money.

I have read the article about using savings which pay next to no interest to pay off debts which have a higher interest rate.

Is it commonsense to use £1000 from an ISA with £3000 in to pay off this credit card bill?

Sorry for going on for so long!!!

northerner999

Yes.

£2,000 is still an adequate emergency fund for most people, and redirect the minimum payment you were making to replenishing your savings.

enthusiasticsaver

Yes it would be better to pay the credit card off. Also close the isa and move your savings to a current account with a better interest rate. Very few isas pay decent rates now. I think if you work out how much interest you have paid on your credit card and compare it with interest earned on your savings the answer will be clear. You will still have £2k left in savings and just resolve to increase asap.

CalumHeath

Yes you definitely should. If you have a genuine emergency you still have the credit card to use.

The recurring theme of your story is you not being able to trust yourself and you not quite being sure where your money goes and how you got into this position: "guessing with the car". To put it bluntly, you're an adult and you need to start taking control; you need to tackle those root causes you've hinted at that get/got you into this situation.

Nowornever

As you say you do know what the answer is already, what is holding you back?

The simple answer is paying off the card, you are actually making it worse as you are being charge interest on £1k?

You do know you have got an issue otherwise you wouldn't have given your friend the CCs. BUT it's great that you did that and you understand that there is then no risk of using this card....

You will be so relieved paying £1000 in CC debt and you will be debt free. Cut up one card and the leave the other with a friend. If there is an emergency use the emergency fund not CC

Pixie5740

Yes pay the cc off. You're ISA is probably earning you buttons in interest.

A friend of mine keeps her credit card in the freezer. She reckons that because she has to wait for it to thaw out it gives her time to decide if she really wants to buy whatever it is she's going to buy. I have no idea if this damages the card in any way though.

getmore4less

Whiteknight wrote: »

My fear is that once the money goes from this ISA I will never be able to replace it or will dip into it for other things and will have no emergency money.

this is the main point.

Do you want to remove the fear and be in control of your money?

To do that you need to know where every penny goes and start making choices based on planning ahead.

A good start(as people can help a lot if you post one) is to do a SOA of where your money goes, start a spending diary to track where it realy goes and keep the SOA upto date and then start planning where you want future money to go(budget).


Being in control and looding te fear is allabout the planning, you clearly can save just needs to be planned a bit better.

Start with this form and post formated for MSE.
http://www.stoozing.com/calculator/soa.php


If you look at other peoples SOA and their threads you will see how helpfull they are to getting a good picture of your finacnes so you can take control.

Whiteknight

CalumHeath wrote: »

Yes you definitely should. If you have a genuine emergency you still have the credit card to use.

The recurring theme of your story is you not being able to trust yourself and you not quite being sure where your money goes and how you got into this position: "guessing with the car". To put it bluntly, you're an adult and you need to start taking control; you need to tackle those root causes you've hinted at that get/got you into this situation.

I think you may have a point, I do feel that I have been living outside of my means over the last twelve months - I do know I had the debt before that but just seeing my savings reduce scared me.

getmore4less wrote: »

this is the main point.

Do you want to remove the fear and be in control of your money?

To do that you need to know where every penny goes and start making choices based on planning ahead.

A good start(as people can help a lot if you post one) is to do a SOA of where your money goes, start a spending diary to track where it realy goes and keep the SOA upto date and then start planning where you want future money to go(budget).


Being in control and looding te fear is allabout the planning, you clearly can save just needs to be planned a bit better.

Start with this form and post formated for MSE.
http://www.stoozing.com/calculator/soa.php


If you look at other peoples SOA and their threads you will see how helpfull they are to getting a good picture of your finacnes so you can take control.

Believe me for donkeys years I have been watching where my monthly income has been going and looking for ways to save money and have a number of savings accounts set up for various expenses (car, dental, socialising/xmas)

I do think this is where my problem started I was more concerned with saving as much money as I could to build up a buffer so I would not have to rely on the credit cards.

I knew what the sensible thing to do was regarding the credit card debt while I was typing out the original post, I almost deleted it. Shortly after posting I decided to pay off the credit card, I will admit it was hard as I was toying with the idea of just paying a little off but commonsense prevailed.

The money I had been using to pay the minimum amount each month will be directed to savings.

northerner999

You've come to the right conclusion, Whiteknight, it sounds like you just need to make sure you are budgeting properly and now don't think that as you have no debt you can start sticking everything on credit!