clearing credit card debt

bulolo

I'd be grateful for any advice. I've had a large credit card debt for several months but have managed to get it down to just under £5000, divided equally over 2 barclaycards, one with a credit limit of about £6500, the other with a credit limit of £4000, interest rate on both is 12.44 %.

I've now got £5000 extra cash and while I could clear the whole debt now, I am terrified to lose this cushion because of what I went through and COVID situation now and going forward.

I was thinking of paying £2000 immediately - £1000 for each card. This would leave me just under £3000 debt. Once I've covered all my other monthly expenses I have £300 monthly to deal with credit card payments, so I assume this would take me about a year to clear the rest of the debt (I have obtained 2-3 months interest holiday from Barclaycard).

Or would I be better off biting the bullet and clearing more of the debt immediately, or even all of it?

I think my chances of getting a balance transfer are low because of my age (very old); the MSE calculator only returned two cards I *might* be eligible for.

Many thanks for any advice.

MallyGirl

I wouldn't pay interest unnecessarily - surely an empty credit card is the same cushion?

bulolo

Thanks - you're right - the cushion would be knowing that I could borrow again with an empty card but I think psychologically the cushion in the form of cash feels safer/more concrete.

AntoMac

I totally get the psychological cushion of having cash but agree with MallyGirl. Once you’ve paid off the balance (saving 50;quid or so interest per month) you could rebuild the cash pot by transferring the money you had available to service the debt into a savings account. Some monthly savers pay (relatively) decent interest so you could also build a little extra in interest by building savings this way.

mjrickett16

I have about £12k spread over four c/cards - all.on 0% balance transfers. I only ever get a new card to take advantage of the balance transfer period however I am running out of Credit cards to apply to! My question is, If I merge my debt onto one or two cards and cancel the others, how long do I have to not have that card until I can apply again for it as a new customer, thereby getting a new customers balance transfer offer?

bulolo

Very true Anto, and for anyone else grappling with a similar issue, I've since found a post by Martin which precisly addresses this (false) sense of security of the savings fund versus paying off debt (not allowed to post link)

Thanks again

born_again

mjrickett16 said:

I have about £12k spread over four c/cards - all.on 0% balance transfers. I only ever get a new card to take advantage of the balance transfer period however I am running out of Credit cards to apply to! My question is, If I merge my debt onto one or two cards and cancel the others, how long do I have to not have that card until I can apply again for it as a new customer, thereby getting a new customers balance transfer offer?

Varies from company to company.
But I would be surprised to see balance transfer offers to be put on hold by card providers for most of this year or even longer. While they service the customers they have now and sorting all the mess that Covid 19 has caused.

Mr87

@bulolo I've seen conflicting views on whether to use all your spare cash to reduce debt. Logically it's the fastest way out of debt, but it really depends on how secure your income is. You mention coronavirus - are you worried about your income drying up? In which case, you might be better off keeping a cash buffer / emergency fund. Sure, you might incur a bit more interest, but that could be the price of security. After all, you can't use a credit card to pay your bills.... 

sleepyjones

Sorry, I thought it was weird that it hadn't been mentioned but now I've just re-read the OP post ... Ignore me

I'm not sure if I'm missing something or if I'm just completely wrong but ...
Could you not just look at getting a 0% balance transfer card and move as much of the balances over to that and then just pay off whats left?
So, if you're offered a £3k balance transfer card, you transfer £3k of the balances over, then pay off the £2k left on the Barclaycards?  Then you still have a bit of cash and two £0 balance Barclaycards (and a £3K card, but at least there's no interest)