Credit card or savings

Sncjw

Hi

I am being strict on my spending and I have paid £100 on my credit card. This is way more than the minimum amount to pay and it’s on 0% until September 2021. Ideally I don’t want this debt as I get stressed out going over a certain amount.

Anyways I don’t know what is best to do. After allocating money to my bills, food and spending money I will have £240 left over. I don’t want to use it straight away in case of any extra bills I don’t know about occur. Which isn’t likely but like a back up.

I was thinking of using the remaining money to pay off my credit card but also feel guilty that I am not putting it in my htb isa. If I put £100 in isa and £100 extra in credit card then it would take me until September to pay it off. Whereas if I used it to pay my credit card off I could be clear by may/June. I want to have a clear record for when it comes to getting a mortgage which won’t be until next year anyways.

What are your thoughts.

Thank you

[Deleted User]

The HTB ISA will make your £100 work harder than paying off your credit card earlier during a 0% deal.

trailingspouse

It seems to me you have three options for this money -



- put it in your emergency fund in case of any extra bills

- put it in your HTB ISA
- pay off your credit card


Personally, I would throw every penny at my debts, but as it's a 0% deal it isn't vital (I'm assuming your normal monthly payment to this credit card is sufficient to have it paid off by the time the deal runs out). I think the ISA should be bottom of your list until the debt is paid off - but that's just my personal opinion.


I think you need to work out which option will cause you least anxiety and go with that one.

EssexHebridean

Sncjw wrote: »

Hi

I am being strict on my spending and I have paid £100 on my credit card. This is way more than the minimum amount to pay and it’s on 0% until September 2021. Ideally I don’t want this debt as I get stressed out going over a certain amount.

Anyways I don’t know what is best to do. After allocating money to my bills, food and spending money I will have £240 left over. I don’t want to use it straight away in case of any extra bills I don’t know about occur. Which isn’t likely but like a back up.

I was thinking of using the remaining money to pay off my credit card but also feel guilty that I am not putting it in my htb isa. If I put £100 in isa and £100 extra in credit card then it would take me until September to pay it off. Whereas if I used it to pay my credit card off I could be clear by may/June. I want to have a clear record for when it comes to getting a mortgage which won’t be until next year anyways.

What are your thoughts.

Thank you

OK - a focus on the bit I have highlighted. Do you have a current, up to date household budget that covers ALL your planned and expected expenditure? And do you have an emergency fund set up that you could use for something entirely unforseen that HAS to be paid? If no to the budget then that is your step 1 here - you might find it helpful to use the SOA (Statement of Affairs) calculator that we point people to - the link is in my signature below. Fill that out - accurately, honestly, and reflecting the way things are for you right now - and then post that in here and we can take a look, help you to spot anything you may have missed and hopefully get everything that bit more water-tight for you.

An emergency fund is a pretty vital part of a good budget in most people's view. It means that if something entirely unexpected occurs, the money is there to cover it without you needing to use credit. If you are renting somewhere furnished, and do not own a car then it only needs to be small - a level to cover small appliances or replace a mobile phone with a not-too-fancy model. If you rent unfurnished - no car, then £500. And if you own your property, with or without a car as well, or rent unfurnished and have a car, then £1000 is a great figure to aim for with an initial, basic EF.

It's good practise to not empty your bank account completely in a month until you hit the next payday - we've all been hit by that random direct debit that comes out slightly earlier than we really expected, or indeed unthinkingly using a debit card for a payment without remembering that the account is running at empty. Leaving a small balance there solves that issue, and then when your next pay hits, simply transfer the money over to the savings it's destined for.

On your 0% card - why not set the monthly payment to a set level - maybe a little higher than the current minimum - and then work out how much that will clear before the 0% ends - you then know what the remaining balance is, and that would give you a set amount to aim to save (in an account paying you at least a little interest) to be ready to transfer that to the card prior to the 0% finishing? Anything over and above that can then go to the HTB ISA. You have the security of knowing that the CC debt is on your radar and being dealt with, then.