Which credit card to pay a lump sum to??

SumacRoastedStrawberries

Hello, 

I racked up some debt on two credit cards while on mat leave and over the past 18 months or so. I was recently given £3000 cash by a relative.

I'm on a reduced income having gone back to work part time and the monthly payments take a real chunk out of my budget each month (as well as bloody nursery fees).

I wondered if you clever people could help me to understand which card should I pay the £3k to (or maybe a bit to both?) to reduce my monthly payments the most? 

Card 1 - Sainsburys 

Balance - £2865 

This was a Balance transfer and is on a 0% rate until June 2023 

Minimum payment is £64.47 I currently pay £70 p/m to this card 

Card 2 - Natwest 

Balance - £5304

Of which £3052 is on a 0% Balance transfer until May 2022, and £2,252 is at an annual rate of 18.276%

Minimum payment is £78.45 and that's what I am paying at the moment. 

My instinct is to get rid of the Sainsburys card completely but I think the clever thing to do would be to pay the vast majority of the money to the Natwest card and get rid of thr Purchases amount which is costing me interest? 

Thanks so much for any advice, please let me know if I've missed any info.

SumacRoastedStrawberries

Can anyone point me in the direction of any tools to calculate payments to work out my options? 

I would just love to wipe out say the £70 to the Sainaburys card every month but know this may not be the most sensible. 

My budget at the min is literally break even to the penny and another £70 a month would be amazing breathing room 

mcpitman

It's a bit of a conundrum..............

If you pay £3k off the Natwest card, will that go off the part off the balance attracting interest? It's usually best to pay off the interest bearing credit before the 0% stuff.

As an alternative you could pay off the Sainsbury's card fully, concentrate on clearing the 18% balance on the Natwest card, then see if a 0% BT comes up on Sainsburys card (or alternative card ) and swap the balance on the whole NW card to 0% in May/June.

So option 1 to save the most in interest, option 2 for "easier" long term management (in my mind).

SumacRoastedStrawberries

Hello, 

I racked up some debt on two credit cards while on mat leave and over the past 18 months or so. I was recently given £3000 cash by a relative.

I'm on a reduced income having gone back to work part time and the monthly payments take a real chunk out of my budget each month (as well as bloody nursery fees).

I wondered if you clever people could help me to understand which card should I pay the £3k to (or maybe a bit to both?) to reduce my monthly payments the most? 

Card 1 - Sainsburys 

Balance - £2865 

This was a Balance transfer and is on a 0% rate until June 2023 

Minimum payment is £64.47 I currently pay £70 p/m to this card 

Card 2 - Natwest 

Balance - £5304

Of which £3052 is on a 0% Balance transfer until May 2022, and £2,252 is at an annual rate of 18.276%

Minimum payment is £78.45 and that's what I am paying at the moment. 

My instinct is to get rid of the Sainsburys card completely as my budget is literally break even even the penny at the minute and another £70 a month would give me huge breathing room. However I think the clever thing to do might be to pay the vast majority of the money to the Natwest card and get rid of thr Purchases amount which is costing me interest? 

Thanks so much for any advice, please let me know if I've missed any info.

mcpitman

SumacRoastedStrawberries said:

Can anyone point me in the direction of any tools to calculate payments to work out my options? 

I would just love to wipe out say the £70 to the Sainaburys card every month but know this may not be the most sensible. 

My budget at the min is literally break even to the penny and another £70 a month would be amazing breathing room 

Your statements from both accounts will show the way charges are calculated as "x"% of the balance monthly, but sometimes a minimum payment of £10 overrides these rules, or any charges may get included on the minimum payment.

eskbanker

Paying off the interest-bearing NatWest balance of £2,252 makes most sense to me as a first step, but what are your plans to address the £3,052 balance when the 0% expires in May?

molerat

You need to pay the £3k to the NatWest card, make minimum monthly payments to the Sainsburys card then throw everything you can at the NatWest to reduce the balance as much as possible before interest kicks in. You should not have been paying over minimum to an interest free card whilst paying minimum to an interest bearing card.  Whilst paying off the lower balance card may give that feel good factor as you would only have one debt to worry about it does not make financial sense.

TheAble

Usually the credit card company allocates the payment to the highest interest rate first. Check the Ts and C's but NatWest is the call.

maxsteam

The bank will allocate payments to the most expensive debt on a credit card first. If you pay the £3k to NatWest you will have no interest to pay for the next few months.

It might work out for you if you pay off the Sainsbury card in full if they come up with a balance transfer deal before May. I don't know if such a deal is likely or if the limit is sufficient to take the NatWest debt. Unless you have information that makes this option appealing, it is likely that paying £3k to NatWest will be the best option.

You should avoid using the credit cards for current purchases while there is a balance carrying as this will attract interest. It's better to use a debit card, a card that you can repay in full or cash for current purchases. 

getmore4less

If the cash flow won't have them paid off by before interest kicks in you need a solution.

Picking up a £0 fee 0%  purchase card to cashflow normal spends can extend the paydown period for no extra costs

anna42hmr

as others have suggested may be an idea for you pay the money to Natwest, as that will mean that no interest is being accrued and paid so all payments made thereafter are clearing the debit itself rather than also part servicing the interest, then may be an idea to start snowballing the debt to pay them off or down (which if the full payment is made to Natwest that will make it the lower card).  

However as the prior poster has advised if the cards are not going to be cleared by May/June when the 0% ends, you will need to start thinking about an alternative solution, as both cards will then be charging interest (i.e making sure your credit files are correct and no errors, no missed payments etc to put you in better stead for a potential 0% balance transfer, if you do not have the funds to clear them down before then.

I will say what ever you do, if you do decide to do the opposite and clear the sainsburys card in full, i know you've said the extra £70 will give you breathing room, i would still put that towards the natwest debt as you are delaying the inevitable as that will need to be paid down and to keep the payments the same if you cant afford to increase the payments will at least mean that the debt is still being paid off quicker.