Which CC(s) to Clear With Lump Sum?

thePhilster69

So, I've got quite a bit of Credit Card debt (thanks to business problems several years ago), and in January, a share save scheme my wife has been participating in is due to mature, and we're likely to get about £6,500 from it (crossing all sorts of fingers and toes for a huge uplift in share value during January to beat that, but who knows, eh??). We're gonna put it towards paying off some of this debt.

I've read all about snowballing, and I think my personality veers more towards the "pay off as many debts as possible" school of thought, rather than "pay off the highest APR first". My credit score isn't great at the minute, and I think this is primarily down to the very high utilisation of credit card limits.

So I was hoping you clever people could give a bit of advice about what plan of action I should take. Ideally, I want to be in a position whereby I can clear a chunk of the debt with this, and then be in a better position for a balance transfer to shift some of the other debt onto 0% and pay off more of the actual debt.

Credit Card 1
Limit: £12,500
Current Balance: £11,500

Credit Card 2
Limit: £6,700
Current Balance: £6,200

Credit Card 3
Limit: £4,000
Current Balance: £3,000

Credit Card 4
Limit: £6,000
Current Balance: £3,700

On the assumption we get at least £6k of a lump sum, my gut told me to try to clear CC3 and CC4, as that will actually get rid of 2 debts in one fell swoop. But, would it be better to clear CC2 altogether (as it's probably the closest to its credit limit)? Or, if we put £3k to the CC1 and £3k to CC2, then both cards would be further away from their limits...

Like I said, what I'm really interested in here is having a bigger impact on my overall credit worthiness, to get a better/longer 0% deal than I seem to be eligible for ATM.

Anyone any ideas of what might work best?

Willing2Learn

thePhilster69 wrote: »

… I've read all about snowballing, and I think my personality veers more towards the "pay off as many debts as possible" school of thought, rather than "pay off the highest APR first"...

… Anyone any ideas of what might work best?

Hi, if it were me, I would start your snowball asap using your preferred method. So pay off card #3 in full and then use the remainder to pay off card #4 (or as much as possible).

Don't worry about your score as lenders neither see or use it. Lenders score you against their independent criteria and policies, using the data held in your credit files and any data you submit in an application.

As far as your credit worthiness goes, just continue to keep all payments to your credit accounts in good order (ie. no late or missed payments). Make sure you are on the ER.

Nasqueron

One thing to consider is whether any of them have or could offer balance transfer deals - if for example cards 2 or 4 had deals you could pay them off in full then BT the debt (or some of it) from the other cards and save money while you tackle the rest.



You could even juggle the debts around if the offers were there e.g. pay off 2, transfer 3 and 4 (or most of it) to 2, then transfer a load from 1 to 4

18cc

In the end its obviously it's your decision but if it were me I would pay off the Debt with the highest APR first! Then try and consolidate the rest onto a low or zero APR card or even consider taking out a personal loan to pay them all off if the interest on a personal loan with less than the credit card interest

Dobbibill

Some cards are known for offering existing customer BT offers.

Depending on who the cards are with should factor into any decision you make, if you are adamant you don't want to do highest APR first. (It is the most long term money saving option normally )

All the best with your debt busting.

Nebulous2

Knowing the lenders / APRs and any promotions on offer would certainly help, but flying blind I'd pay off credit card 4 and put £1000 each to the others, to reduce utilisation. Credit card 2 in particular looks too close for comfort.

badmemory

But if you pay off the highest APR first that frees up more to pay the succeeding months & your ratio of debt to income will improve quicker.

thePhilster69

Thanks everyone! Pretty sure CC4 is a Barclaycard, and I know they can be good for BT offers to existing customers, so I was definitely considering clearing that one, and then seeing what might be available from them. Any ideas how long after clearing it that BT offers might become available?

Anthorn

APR is relevant and it makes sense to pay off the ones with the highest APR first because you save on interest. But in the case of all the APRs being much the same which in the case of normal cards will like be in the region of 18.9% it makes sense to pay off the ones with the highest balance first.

But have a look at the Debt Snowball Method which is a debt reduction strategy I have used with great success:
https://en.wikipedia.org/wiki/Debt-snowball_method

Nasqueron

thePhilster69 wrote: »

Thanks everyone! Pretty sure CC4 is a Barclaycard, and I know they can be good for BT offers to existing customers, so I was definitely considering clearing that one, and then seeing what might be available from them. Any ideas how long after clearing it that BT offers might become available?

I have a Barclaycard BT card and I get offers monthly pretty much even though I have a balance on there. I'd log onto their site and see what they have on your account if you don't get letters in the post. If it is a Barclaycard I'd clear that one for sure as they're likely to start sending you BT offers if you have a zero balance. After that see what the others are and if they have any offers and go from there

Chrysalis

I was going to post a simple pay off highest interest % first.

However as others pointed out if a card offers 0% BT, then pay that down, then you can transfer another card's balance to it using the 0% BT.

Most providers seem to offer ongoing deals.

Virgin Money, Tesco and Barclays, are all bombarding me with deals every month. MBNA I am not sure if they are, Capital One definitely dont.