Is it a better idea to....

Newyorkdreams

To overpay £200 per month on a 25 year mortgage on a 2.85% deal or put your £200 to reduce your credit card debts on 0% deals which are due to expire between December 19 and August 21?

This forum has always taught me to pay off higher paying interest debt first which I do, but I know the mortgage is a long game, and the credit cards are a short term debt that I need to deal with.


Or should I throw all my extra cash at paying off the credit card debt and ignore the mortgage over payment until the credit card debt is all cleared, taking one thing at a time?

Views most welcome. Thanks.

NYD

Toonsy

Personally I'd be clearing the first 0% card. Then the one that expires next and so on.

MallyGirl

I'd be putting the £200 in a regular saver earning decent interest until just before the 0% deal expires then using it to pay off as much of the card as possible.

Mnd

Exactly as Mallygirl suggests. Don't pay any credit card interest if possible. ( don't forget the possibility of balance transfers to further 0% deals)

leicestersq

The rule about paying back the one with the higher rate of interest is a good one. The problem here I think is that the current rate of interest on your credit cards will go up after a certain date. So what is more relevant is the overall rate of interest you will face from between now and when you pay back the last penny of the debt. In which case, and I know I am making a lot of assumptions, it sounds like pushing your cash towards your CC debt is the best course.

Assuming that you cannot pay off your credit cards in full at the time that the interest rates go up, and assuming that you cannot switch the debt to another zero rate deal of some sort and that you will have to pay 15% or more on that debt, then the best course of action would be to keep the cash in the bank earning some interest, and pay off as much of the CC debt as you can when the zero percent deal ends.

getmore4less

Run a cashflow analysis with, all the debts and when their rates change, savings account(s) and their rates.


the 0% cards need their balances kept as high as possible and paid off/moved to a lower rate when the zero % runs out.

The thing with most BT deals is the fees that means moving the money may be no cheaper than the mortgage anyway.


£200 paid off mortgage now will save around £5.70 for when the Dec 19 card is due.

What rate interest can you get saving, monthly savers are over 2% so the saving are lower.

Then if you move the balance what's the fee you need to add that

If a BT fee + the savings rate is more than 2.85% save and pay off the balance

The cheapest option to have the CC debt roll over is 0% fee cards and the easiest of those are the purchase ones and using that for normal spends while saving the cash to tackle the once that will drop out of 0%.

Fireflyaway

Get rid of the credit cards. Once you have no credit card payments you can put the extra on the mortgage. If you pay off the cards you will see the result quickly which will motivate you to want to carry on the good work.

Unicorn_cottage

Have you got £15k of debt at 0%?

chrisfreelander54

Open a nationwide flexdirect current account, it pays 5% interest on balances upto £2500 for 12 months.

You will need to transfer in £1000 per month to get the 5%. (Pay in £1000, from another account and then transfer it straight back out again, leaving in the £2500 to gain your interest)

Not sure how many accounts you can have but I do know that when 12 months is up you can open another and get the 5% interest on that one for 12 months.


Save the money in there towards your credit card and pay off in full just before the 0% deal ends.

DannyPearce90

You should focus on paying off the debts with the highest interest first.

This will free up more disposable income, which you could use towards mortgage overpayments in the future!

somethingcorporate

DannyPearce90 wrote: »

You should focus on paying off the debts with the highest interest first.

This will free up more disposable income, which you could use towards mortgage overpayments in the future!

Did you bother to read the thread? The debt is at 0%!