How to reduce the interest on our credit card

Mrworth

Any info towards helping us to sort out our situation would be really appreciated.

Currently have a balance of around 7500 on an MBNA credit card.

They are charging us 23.5 interest on it.

Currently making minimum payments of around £100 per month

This means we are only just paying off the interest each month and its getting no where fast.

We have tried for loans to cover this debt from our own bank, but have been refused, even after going in personally. Thought there might be a real human who could see the sense in this loan and the money it could save us over the life of the repayments.

The card is in my wifes name, and although her experian report gave her a rating of average, it has in the last month risen to excellent. going up around 270 points to a few shy of their 1000 top score

The big question is what is the best way of dealing with this debt?
Would it be possible to get MBNA to lower the interest rate and how might we handle the situation. What questions should we ask, proposals should we make?Is there any way of doing this without further damaging our credit rating for the future.

We earn around 40k per year but are stretched. i have loans in my name but at sensible rates. This card seems to be the killer.

We dont object to paying off the money but were naive to the reality of the situation until i started looking at sites like this.

Please help

Clariman

Hi Mrworth

The first thing I'd say is that you need to pay off more of the MBNA card each month. Why? 2 reasons. Firstly, my calculations show that your £100 payment is not covering the interest that is added each month. After another 6 months, your debt will increase from £7500 to £7707 which is not the direction you want it to go. Secondly, the best way to clear a debt more quickly (apart from paying more off each month) is to transfer the debt to another credit card that has a balance transfer offer. Typically these would be 0% for 6 months or something like 3.9% to 5.9% for the life of balance (i.e. until you pay the debt off). Your problem will be that 99% of credit cards insist that you make a minimum monthly payment of at least 2% (some 3%). 2% of your existing debt is £150 - more than you are currently paying.

If you could pay that £150 a month and transfer your debt to the Goldfish 3.9% LOB card, my calculations are that you would pay off that card in 57 months, even taking into account the Balance Transfer fee.

You can plug the figures yourself into a Balance Transfer Calculator which I have recently written.

Clariman

dc

You have the right idea with respect to MBNA's punishing rate being being the main problem. Clarimans advice is good, however when I get into your situation, stopping spending on anything but essentials for a couple of months is the only way forward.

If a credit card is an option, then a l.o.b. card with zero bt fee and max 2% monthly min, they can be cheap alternative to unsecured loans. eg my car is on one. Alternatively a cc with 0% max as poss period with lowest fee, and £5/month min payment, ( shades of MBNA, which I suspect is how you ended up here), to give you breathing space to find a fixed low % home for the debt.

There are other banks than yours that may give you a loan, say A&L, that is how they make their money, so worth a few enquiries.

If you have a mortgage then I would try shifting the debt there, as possibly the best solution.