Unsure what to do, save or pay off credit card

khampson

Hello, I have a credit card that has £4000 that has a 0% balance for 22 months, I have a savings receiving 3% a month that has a balance of £1000, my question is do I continue to save while paying off around £40 a week on my credit card and saving £40 a week or pay more on my credit card while saving less, alternatively pay minimum on my credit card and more into my savings, if the credit card still has a balance when the free interest is up I just take out another interest free credit card or use the savings to clear the credit card?

I don't intend on using the credit card anymore so what am I best doing?

Thank you in advance

[Deleted User]

From a purely financial viewpoint, if you can earn more interest on the money that it's costing you to borrow, then do that.

If you're thinking about mortgages etc, you may want to take a different approach.

khampson

I do have a 21 year mortgage that I am paying on, I could pay minimum on my credit card and put a little extra down on the mortgage while still saving a little?

Voyager2002

So long as the credit card is interest-free, you want to have the £4,000 available to pay it off but rather than actually paying it off (saving you nothing in interest) keep the money in your savings account and earn some interest on the money. So there is no benefit to you from paying more than the minimum each month. Just so long as you will have access to your savings the day that they are needed, and do not forget about paying off the card as soon as the interest-free offer stops.

Of course, the offer of another 0 per cent card add the end of the deal would enable you to extend this situation, but plan to repay and have the money available since you can never be sure that a suitable deal will be offered to you at the right time.

In terms of building your credit record, it is not a good idea to use ALL of the credit available to you. So from that point of view it might be sensible to keep the balance on your card below about 80 per cent of the credit limit.

Voyager2002

khampson wrote: »

I do have a 21 year mortgage that I am paying on, I could pay minimum on my credit card and put a little extra down on the mortgage while still saving a little?

What interest does your mortgage charge? If it charges less than the 3 per cent you get on savings, there would not be much point.

khampson

As for credit available I had 4 credit card with access to over 20k, I closed 2 off these accounts and now have access to 10k, my credit score is important as I negotiate mortgage and other credit cards when needed, am I better off opening other credit cards but not actually using them to boost my credit score or does it not work like that?

Thanks

khampson

Voyager2002 wrote: »

What interest does your mortgage charge? If it charges less than the 3 per cent you get on savings, there would not be much point.

Yes it's only about 2.5% and it's fixed for 2 years, I always negotiate a new mortgage deal after the fixed period

[Deleted User]

khampson wrote: »

my credit score is important as I negotiate mortgage and other credit cards when needed

Your credit score isn't important for anything. No one ever sees it or would take any notice of it if they did.

What matters is your credit history and how you look to a lender.

bigadaj

khampson wrote: »

Yes it's only about 2.5% and it's fixed for 2 years, I always negotiate a new mortgage deal after the fixed period

So no pont laying off when you get more on savings, though always remember the total cost on a mortgage deal with short term fixed deals needs to include charges and fees, this can push the effective rate much higher.

The other thing to remember is to align your liabilities with your savings, not much point saving a little on a mortgage to find that you don't get a renewal on your 0% credit card meaning that saving 2.5% might cost you 20%.

Anthorn

khampson wrote: »

Hello, I have a credit card that has £4000 that has a 0% balance for 22 months, I have a savings receiving 3% a month that has a balance of £1000, my question is do I continue to save while paying off around £40 a week on my credit card and saving £40 a week or pay more on my credit card while saving less, alternatively pay minimum on my credit card and more into my savings, if the credit card still has a balance when the free interest is up I just take out another interest free credit card or use the savings to clear the credit card?

I don't intend on using the credit card anymore so what am I best doing?

Thank you in advance

Swings and roundabouts stuff. Looking at my own situation, I could easily clear my credit card and loan balances out of my emergency rainy day fund and I could easily pay cash for the things I buy instead of saving. But in that case I would not have any funds to fall back on in an emergency.

blink18

Anthorn wrote: »

Swings and roundabouts stuff. Looking at my own situation, I could easily clear my credit card and loan balances out of my emergency rainy day fund and I could easily pay cash for the things I buy instead of saving. But in that case I would not have any funds to fall back on in an emergency.

other than the credit cards that have now been cleared, eh, you'll be destitute I tells you, destitute.