Repayment strategy for 0% cards

hannanshah

I have a few credit cards with the following limits

Cap One: No balance / £4k limit / card I've had for years

Nuba: £8,700 fully used 0% deal till June 2019
MBNA: £9,300 fully used 0% deal till July 2019
M&S: £2,000 fully used 0% deal till April 2019

The above 3 cards I've had for less than 2 years.

So that's total £20k 0% debt sitting on 3 cards with a fourth unused card (which is a long standing old card).

The last 3 are fully utilised on 0% deals.

I will soon be able to pay off at least £10,000.

However, I won't be able to pay the remaining £10k balance before the 0% deals end. I therefore will need to do a balance transfer of up to 10k by next year.

At the moment I am not eligible for any more new credit card deals obviously due to the high utilisation I have. However, I expect the position to improve after I pay off 10k next month.

What is the best strategy for me to make my upcoming £10k payment next month?

I can think of two options:

1. Spread the 10k repayment over the 3 cards

2. Pay off one of the big balances

The overall credit card utilisation will be the same with both methods (ie. A total 10k balance with £24k of credit limits)

Which option will give me the best chance of qualifying for a good balance transfer card in the coming months?

With option 1, the concern is that I might not qualify for a good 0% deal for balance transfers if I have balances across 3 of my cards with the big credit limits. I won't be able to cancel those cards. I could later cancel my old capital one card (although that is an old standing card which I've heard is a good thing to keep hold of).

With option 2, I will still have a couple of cards almost fully utilised but my overall credit utilisation percentage will still fall. If this isn't enough for me to qualify for a good balance transfer card then the option to close the fully paid off card is then available to me in case that will help (although maybe that won't help as it will mean my overall percentage utilisation will go up if my total credit limit drops after cancelling!?).

Any ideas?

[Deleted User]

Generally, I'd advise paying off whichever ones have the highest go to rates.

If similar though, out of the ones you have, MBNA would be most likely to give a repeat offer. Although that would mean losing a couple of months of the current offer.

JimmyTheWig

I agree with zx81.
The "official" right answer is to pay off the M&S card and pay the rest off the Nuba card. With a view to clearing the Nuba card completely before its 0% runs out. Thus leaving you as long as possible before you need a new 0% deal.
But the chances are if you clear the MBNA card then they'll offer you a decent enough deal to transfer the Nuba onto it.

I would want your total balance to be less than half of your total credit limit. So maybe cancel the M&S card once you've made the 10k payment, but certainly don't cancel the others.

hannanshah

Thank you for the replies.

If I did pay off the MBNA in full now I won't need the existing offer anymore as I'm working my way towards clearing all of the balances eventually.

What approach should I adopt to get a 10k balance transfer deal(s) when I need it as my existing 0% deals expire next year?

1. Wait for an existing customer offer from MBNA over the next few months

2. Ask to cancel the MBNA next year and see if I'm offered a balance transfer deal to be retained.

3. Cancel MBNA totally next year and then see what deals are available to me next year.

4. None of the above and just see what other cards I become eligible for after paying off 10k.

MBNA are usually generous with their credit limits but other card providers may not be so generous which may mean I need 2 cards, if I'm transferring 10k so I'm trying my best to plan ahead.

JimmyTheWig

Pay off M&S.
Pay off as much as you can on MBNA (*) and pay off the rest as soon as you can.
Close the M&S account if you want. It's not an exact science. Some people think this would be a good idea, others wouldn't.
Don't close (or even ask to) the MBNA account.

MBNA will probably write to you offering a balance transfer deal.
Don't take them up on this at least until this time next year as there is no point.
Start looking around this time next year.
If things are looking good for you, you can probably get a better deal as a new customer elsewhere than MBNA offer you. If so, do this. If not, use the MBNA deal that they offer.

(*) "Advanced users only" - consider Stoozing. If you want more info, just say.

System

Pay off NONE of them, put the £10k in the highest return account you can and leave it there, continue your normal payments on all the cards. When the first card is due use that £10k to clear that, rinse and repeat.