Paying a ‘fixed amount’

Ergates

Clueless196 wrote: »

Hi all.
So I have some debt on a Barclays credit card, I had a look on the new replacement calculator they have and it shows me I’ll save (time and interest) considerably by paying a ‘fixed amount’. Is this something I need to set up to do? Can anyone explain to me how/why it’ll bring the balance down faster? I googled it and I was shown standing orders is this the same thing? Thanks for any help.

As others have said, it's comparing paying a fixed amount vs paying the minimum.

£85 will your minimum payment this month. However, each month, as you pay off the balance, this will drop. (assuming you don't spend more on the card). This means that each month you'll be paying off less and less - which is why it takes years to pay off the balance, and the longer you take it pay it off, the more you pay.

If, however, rather than setting your card to pay off the minimum, you set it to pay of a fixed amount - *equal to the minimum payment this month* (i.e. £85), you will pay off your balance *much* faster - because you won't be paying off less and less each month. In fact, you'll be paying off more of the balance each month (because the interest charged each month will drop). Obviously, the higher you set the fixed amount, the faster you'll clear the balance - even a few more pounds a month can make a big difference.

You should be able to set this up from your Barclaycard account page.

pochisoldi

Way back in the mists of time when I was clearing my credit card debt, my credit card statement came out shortly before pay day, so I setup a standing order to go out on payday, thus ensuring that my fixed payment was credited to the account two weeks earlier than if I'd used a fixed amount direct debit.

If you do this you save some interest (probably pennies), and you also set yourself up for when you are debt free - you won't miss the money going out, and when you clear your cc debt, you change the standing order clear the next debt (rinse and repeat until debt free), then change the SO to pay money into your emergency savings fund, and when that's topped up enough, the money goes to the ISA/holiday fund/pension/whatever...