Credit card help!!!!

skintdaddy79

Hi guys,
This is my first time on here so bear with me! Firstly let me just say this website is a boon, I’ve referred to it many times so here’s hoping it can help me again via this forum.
My issue is I have 2 credit cards which I owe on and currently just paying off the minimum payments on both . Trouble is, the balances just don’t seem to be shifting and I’m sick of paying this and not getting anywhere!! I’m considering getting a personal loan, for maybe 5 years at the cheapest interest rate I can find , to completely pay them off totally. I have ‘tarted’ a few times with credit cards but I still can’t seem to shift the balances on the 2 cards. I’ve provisionally worked out that I could pay off the loan in 5 years at lower monthly payments than just paying the minimum payments on both cards (the minimum payments are all I can currently afford at the moment). If I balance transfer both cards to one 0% card will the minimum payment on the new one be more than what I’m paying now ? Not sure I want to keep tarting cards as I don’t want it to affect my credit score.
Amounts as below on the cards;
ASDA – £6824.68 APR- 19.9% CURRENT MIN PAYMENT= £172
VIRGIN- £5659.55 APR- 17.48% CURRENT MIN PAYMENT= £86.99
Any help would be greatly appreciated, just want some light at the end of the tunnel!!
Thanks

Kidder81

I don’t think you need help with credit cards per se. More help with being a debt free wannabe.

I say this as you’ve tried reducing the balances through balance transfers and by your own admission the balances haven’t reduced.

You need to complete a statement of affairs and look to make savings to pay towards your debt. In the meantime you need to look for ways to reduce your interest payments. Maybe another balance transfer and cut up current and new card?

NoTB

I'm currently dealing with an absolute mountain of debt - 49k.

18k of that came from having a credit card, getting a loan to clear it, then using the cc again.

I'd definitely advise against getting a loan unless you completely trust yourself to cut up the card, close the account etc etc. I wish I did as I'm not in the process of seeking professional debt advice and entering into an arrangement scheme as a result.

Why not phone Asda and Virgin to see if they can give you a reduced interest rate or freeze the interest?

Alternatively, why not try consolidating it onto a 0% balance transfer card? MBNA are the best I've come across.

EssexHebridean

NoTB sets out clearly why consolidation (traditional style - a loan to "clear" debt) doesn't generally work. Please don't do this!

The first thing you need to do is to get a budget in place - and the best tool we know of for that to start you off is to put together a Statement of Affairs - often referred to on here as your SOA. The link to the calculator this is in my signature. You need to make it as full, frank and honest as you can, and it needs to reflect the situation as things are "right now" - not what you think you "should" be spending. Once you have that then you live with it for a while to start off - that shows you the bits you have right, the bits you have wrong, and makes you think about the bits you can do without altogether! we'd always suggest that if you feel able to then post that SOA into here as well - we can take a look over it for you and give you some pointers of anywhere you may be able to make savings that you have missed.

Another thing to do is to sign up to the MSE credit Club - you say you're already a site user so you may know about this - but it has eligibility checkers so you can see whether you might be entitled to any 0% balance transfers. The key with these is to either - a) if you're in doubt as to your staying power pay as MUCH off each month as you can scrape together or b) if you feel you can stick to it for a period of time - divide the balance you have transferred by the number of months on the interest free period, then set the Direct Debit to pay this amount (rounded up to the nearest £1) each month. If you just pay the minimum each month you won't get it cleared by the end of the 0% and that's not the deal, with using these for clearing debt. whether you go with a) or b) the first thing you do ahead of anything else is to shred the card. You don't need it to make payments against, and that is ALL you are using this card for!

skintdaddy79

Thanks for the reply.
"Alternatively, why not try consolidating it onto a 0% balance transfer card? MBNA are the best I've come across." -- thing is with this I don't think I'd be able to pay off the total amount of my existing balances in the 0% interest period. Hence why I was looking at a 5 year payment plan at a lower interest rate

EssexHebridean

skintdaddy79 wrote: »

Thanks for the reply.
"Alternatively, why not try consolidating it onto a 0% balance transfer card? MBNA are the best I've come across." -- thing is with this I don't think I'd be able to pay off the total amount of my existing balances in the 0% interest period. Hence why I was looking at a 5 year payment plan at a lower interest rate

Ah, but the trick is to keep your eye on the dates and a couple of months before that 0% deal ends, you do the same thing again - and again - same rules apply, you either divide the total by the number of months and pay that amount each month, or you hammer it with everything you can muster to start with while leaving the DD set to the minimum

Remember - credit card companies never want you to clear a balance else they earn nothing - so paying minimums only is NEVER the way forwards.

Lower interest (in the form of a loan is on paper very good, but you can do a lot better by shifting debt to 0% and then learning the tricks of th trade to get that cleared as soon as possible. I reckon without a shadow of a doubt we could find savings on the SOA, for a start, and if you could get all that current debt onto 0%, even just on the amounts you're paying currently you could have it gone in under 5 years. If you can find a few extra £'s each month, then you could cut it down to less than that. The lessons you learn as you go along will also help to ensure that you don;t find yourself back in the same situation again in a couple of years, with credit cards AND the loan to pay for...

skintdaddy79

Thanks again . My only worry with this is that I would need to transfer both of my existing card balances;
(£6824.68 + £5659.55+ =£12484.23 ) to the new 0% balance transfer card so what would the minimum payment be on this? Potentially more than I can currently afford. Kind of need the monthly payments to come down sooner rather than later so that means having a longer payment period at a lower interest rate as possible. I know what you mean about having a loan and then using cc again but i'll cut these up if I went down the loan route
I will have a look at the SOA to see if any potential savings but I'm sure I have stretched this already.

EssexHebridean

It's pretty unlikely that you'll get the whole lot onto a single card I'd say - although you never know. What does the MSE Credit Club have to say about your likely eligibility for any of the 0% BT cards? How about anything with a low "life of balance" rate that would accept a transfer?

As for the minimum payment - if you think about it rationally it's not going to be higher than you're paying currently, is it!

I suspect you've made your mind up about the route you're taking to be honest, all I can do is urge you to take on board what NoTB says on this thread, and also things that the likes of Sourcrates have posted elsewhere on here.

Sanctioned_Parts_List

Just to reinforce NoTB and EH's posts - I took a consolidation loan to pay off credit cards in 2007. By mid-2008, I had two maxed credit cards AND the loan to pay.

Just to prove my own stupidity, despite paying it all off over the next couple of years working serious overtime, I did it all again in 2011.

And then I started doing it a third time, before finally getting the message...

It's pretty much the same routine for most posts on here: first do your statement of affairs, then get your spending under control. Then, and only then, see about shifting your debts to other locations. In that order.

Once the spending is under control, consolidation loan or balance transfer cards are both options, but the mistake I made thrice, along with many others on here is to reach for the loan first, without doing the groundwork.

skintdaddy79

So if i went down the loan route to clear the credit cards i'd have to be super disciplined not to use the credit cards again. Cutting them up ect?
I'm just concerned that i"d only be able to balance transfer 1 of the credit card's amount and still be paying the minimum amount on the other card. By consolidating i could be paying them both off at the same time? Trouble is i dont think I'll be able to afford any more than the minimum payment amounts i'm paying now. I'll do the SOA as suggested to be sure but i'm quite confident that is the case.

My train of thought is ; ASDA card @ £6824.68 divided by (for example) over 30 0% months =£227.49 per month then plus my VIRGIN current minimum payment (£86.99) = £314.48 which is way off what i can afford monthly.
I hope that makes some kind of sense. I just want the quickest and painless way off clearing these cc debts. If it means cutting up cards so i cant use them they'll i'll do so.

Sanctioned_Parts_List

Whichever way you go, you will need to be super-disciplined. When you open a balance transfer card, your old card isn't automatically closed, and so the temptation is to keep using it.

I did. That's how I ended up with 2 maxed cards and a loan. The path to success is to cut up your old cards, AND cut up the new card the day it lands on your doormat.

I digress.

When it comes to balance transfer cards, it's not an all-or-nothing thing. You don't have to pay the whole amount within the interest free period if you can't. What it allows you to do is put a portion of your debt at 0% interest, and then prioritise the higher interest debts. You free up more of your money to paying off debt, and less to paying off interest on the debt.

Your first job is to do that SOA. That's the only way to gauge affordability. Only then is it worth looking at balance transfers and budgets.