Had our light bulb moment - opinions on credit card snowballing

mrsmoneypenny90

Happy Friday everyone,
This is my first post so hello! 

So today myself and my OH finally sat down and did the dreaded statement of affairs, seeing that bottom line figure has really given us the kick up the backside to get our acts together. We really want to buy a house one day and what has scared us even more is that we might even have the option of being gifted a deposit by a family member, but even if that happened I still don’t think we would be accepted for a mortgage based upon the way we have recklessly used credit in the past.

The good news is that as of January this year we have paid off a £3,000 overdraft, a £250 overdraft, and have paid off roughly £1500 in credit card debt. However, we didn’t really have a plan and because we thought oh great we are paying it down we have not been taking it as seriously as we should. 

The (very) bad news is that we owe A LOT! bottom line figure as of today is £52,000 made up of credit cards and £5,800 left on a bank loan. 

Luckily we are both now decent earners and our joint income is £4,850 per month. After all our household bills, groceries, small savings pot for Christmas & Birthdays and £100 ‘luxury living’ we have £1,250 left over after the minimum payments have been met on the CC’ and the loan repayment.

i am looking for advice on credit card snowballing methods. I have filled out one calculator today and it says we could be debt free within 24 months which is incredible, and has actually really spurred me on to get this sorted once and for all. This method suggested paying off the highest interest rate card first, I just wondered has any one used this method or are there better ones out there?

have a good weekend everyone 😊

[Deleted User]

Paying the highest rate first us the quickest way to be one debt free and makes you richer.

Some people pay off the smallest balance first for a sense of achievement and if they're happy to be in debt for longer.

mrsmoneypenny90

Thank you, actually looking forward to getting stuck into this and see the numbers go down! 

monetxchange

Once the numbers start coming down, you'll become hooked! Good advice to pay the highest interest first, but if you've got one or two small credit cards with a few hundred quid on them it would be a nice sense of achievement to get rid of them in one fell swoop one month. Good luck!

mrsmoneypenny90

Thanks Moneytexchange, i see you have now become debt free well done!!! Out of interest was your debt credit card debt ? 

monetxchange

A large amount of it was credit card debt, yep. I kept checking for eligibility for 0% balance transfer cards to reduce the interest I was paying. Wasn't eligible for much at the start as had so much to pay off, but they gradually came. Most important thing was budgeting tightly and throwing every spare penny at the debt!

ryanm8655

Set up a spreadsheet based on your credit cards detailing APRs and when any 0% offers end. (You might find you have multiple APRs on cards depending on what the money was spent on).

Then I’d tackle the highest interest one by one. You may find that you get more 0% offers from your current providers as you clear the debt but can also check for offers every month or so. Once you start getting 0% offers it makes a huge difference as more of your money is spent clearing the debt rather than just paying interest.

Another thing I have done is set my DDs on all cards to £1 above the minimum. Helps clear it quicker but also helps with creditworthiness from what I’ve read.

mrsmoneypenny90

Currently don’t have any on 0% deals 🥺 and due to poor credit scores (presumably because of the level of debt as we never miss payments) haven’t been able to shift any onto 0% but if deals start to come through in the future then I will certainly move some overs. Well done again on your amazing commitment and success , you must feel so relieved 

Yellow_mango

Another possible advantage of clearing smaller balances first is that there’s a chance they’ll then offer you balance transfer deals (I’ve often had a flurry of deals shortly after clearing a card). 

I also liked to set my payments on other cards for a fixed amount slightly above the current minimum rather than letting the minimum decrease a little each month. This a) makes it easier to budget as you know exactly what the payment will be each month and b) slowly chips away at the balance a little faster by making a small (but increasing) overpayment. It adds up faster than you’d think and gives a little boost at no real cost. 

Good luck!

enthusiasticsaver

There are two ways you can clear the debt.  Smallest to largest or most expensive first to cheapest.  Personally I would tackle the one charging the most interest first.  Hopefully over time you will be offered 0% balance transfers but even with a decent credit record these deals are not coming up as much now.  Do you know how you got to that level of debt even though you have good incomes with a healthy surplus?  

mrsmoneypenny90

enthusiasticsaver said:

There are two ways you can clear the debt.  Smallest to largest or most expensive first to cheapest.  Personally I would tackle the one charging the most interest first.  Hopefully over time you will be offered 0% balance transfers but even with a decent credit record these deals are not coming up as much now.  Do you know how you got to that level of debt even though you have good incomes with a healthy surplus?  

Thanks for the advice, I am going to start with the highest interest rate first! On reflection we got into debt at a young age. My OH bought a property at the age of 20 and was thrown credit if he wanted it, his first credit card came with a limit of £9,000! Totally ridiculous in hind sight giving that much available credit to a young person. And honestly, we didn’t learn about money at school or from our parents, I was a student at the time and my OH supported me so the debt started then. It is only in the last 3 years that I have started to earn good money, and we just used to see credit cards as a way of buying things we wanted NOW. It’s all our own fault but I’m just glad we have both had the wake up call now as opposed to another five yrs of reckless spending. But I still think children should be taught about finances at school! X