Clearing Credit Card Balance + Balance Transfer Advice

xavier2k3

Hi all,

I actually have two questions as I'm after a bit of advice.

I am going to be relocating and leaving the UK in the next 12 months, so need to clear up the debt I have ideally before I go.

Before I begin, some info:

Current Debt:
£750 (17.8% - tsb student credit card) from my student days
£5850 (18.69% - lloyds bank platinum)
£2500 (16.8% mbna - previously virgin money card)
£3000 overdraft but around £1600 in available cash.

Additional: £2500

Back Story:
Due to an incorrect default placed on my account previously in my younger years (now gone), my credit rating had never been stellar and I previously balance transferred around £2500 to an MBNA card, but due to irresponsibly not having a direct debit set up, I lost the offer due to missing a payment. Due to the poor credit rating because of the default, I was lucky to have one of my parents offer to balance transfer one of my cards. The balance on that card is now down to £2500. So realistically, in total I owe around £11,600 in credit cards. Around £9,000 in my own name, plus the overdraft.

I'm in a position now where I have to balance transfer the remaining £2500 off my parents card due to the period ending, and fortunately again they've offered to help me out and have registered for a Sainsburys 0% fee 26 Month BT Card (Mainly due to 0% fee). They've been advised the credit limit is likely to be £3,000 from an online application (still TBC), but were obviously helping for a bit more. Both are semi-retired, work part time (consultancy) and own their own mortgage free home with decent credit ratings and no recent other credit applications in the past 12 months. They are open to applying for another card, however with in the hopes of getting a higher credit limit (e.g. A bank rather than Sainsburys).

I'm lucky enough to earn £48k per year, but with bonuses around £67k and now taking the opportunity to tackle this debt. I still don't have a great credit rating, due to high utilisation and stupidly due to a number of factors have missed have exceeded limits/missed payments, due to just not making it a focus to get the right direct debits in place etc and obviously the debt that I have. I've made no credit applications this year, either. My outgoings are probably no more than £1500 a month I'd imagine, so I'm in a position to cut down the debt in sizeable chunks. I've run some eligibility tests and seem to have a 50% chance of most of the decent banked cards, with Capital One and Aqua cards for poor credit scorers offering 90-100% acceptance, but a 3% fee for transferring, with a max limit of £1250-1500.


Question 1: What would you advise would be the most effective way to clear the debt? Primarily in terms of which card to tackle first/reducing overdraft first?

Question 2: What effect does my parents helping out with a second card to shift more debt so I'm not paying unnecessary interest, have on their own ratings, if any? Should I/Would it be recommended and if so are there any suggestions for particular cards possibly?

Sorry if this is all a bit of a wall of text, but really keen to finally tackle all this debt and stop paying unnecessary money that i've been paying for years.

Thanks in advance!

[Deleted User]

xavier2k3 wrote: »

Question 1: What would you advise would be the most effective way to clear the debt? Primarily in terms of which card to tackle first/reducing overdraft first?

Pay minimum payments plus £1 on everything and then throw every spare penny at the highest rate debt.

xavier2k3 wrote: »

Question 2: What effect does my parents helping out with a second card to shift more debt so I'm not paying unnecessary interest, have on their own ratings, if any? Should I/Would it be recommended and if so are there any suggestions for particular cards possibly?

It could limit their future credit options It certainly won't do them any favours.

With a couple of thousand spare each month, I'd just get on and pay the debt off the old fashioned way without dragging anyone else into it.

bengalknights

Agree with zx here clear the highest interest debt first then follow down on it until its all gone

Candyapple

Following on from the above posts, here is the snowball calc:
http://www.whatsthecost.com/snowball.aspx


You said you owe £11.6k on cards.

You said you earn £48k (£2968 after tax) less £1500 your outgoings = £1468 to throw at debt.

It would take you 8 months to clear the £11.6k based on the info you have given.


You said you earn £67k (£3886 after tax) less £1500 your outgoings = £2386 to throw at debt.

It would take you 5 months to clear the £11.6k based on the info you have given.

Why bother going to the trouble of involving your parents to take out cards for you and you yourself applying for more credit cards, when if you knuckle down for a very, very short period of time and you could be debt free? It's a no brainer if you ask me.

xavier2k3

This was all pretty much in line with what I was thinking so thanks thanks very much. I just wasnt sure whether it would be worth moving the debt to save paying the extra interest or not.

I'm quarterly bonuses'd on performance and most likely finishing employment at the end of the year, so that gives me a 6/7 window essentially, so besides clearing at least 1k a month of the debt minimum, I'll have to wait for the big sums to pay off big chunks of debt. That was more the reasoning really behind asking the 2nd question.

What's the rational behind minimum payments plus £1? It looks better or?

[Deleted User]

It avoids the minimum payment flag, which can suggest you're struggling.