Credit Card vs Saving

deltofe93

Hi everyone, 

New here and looking for some financial advice. 

I am currenly living with my boyfriend and his parents saving for a house since Jan '21. We were given a deadline of 2 years to each have saved 12k (I'm at 7.5k now, with the help of a LISA). 

I'm big into horses and finally bought my own with my redundancy money in March '21. (I walked straight into another job paying me 4k more). His parents were fine with this and didn't tell me 'no', just said as long as you are saving and watch out for vets bills. She is now insured. 

WELLL... Come March '22 and she has to go to the vets, and comes out with a £2k vets bill. With probably another £1k by the time this is all finished. 

I put the £2k on my credit card. My phone was stolen in London and then smashed (by said horse) so 2 insurance claims also added to the credit card. Balance as of today is £2049. This is interest free until December. 

Do I 

A) not save anything for the next couple months, and pay off £600 each month and then save hard for the remainder or vice versa 
do half and half (£300 to CC, £300 to savings), clearing the CC by December meaning I will have £10k and 0 debt
C) save £300 into LISA each month, and put £300 into a Chase account to earn interest, with the view to use this to pay off the CC in December 

Let me know what you think! 

[Deleted User]

Pay the minimum until December, then clear in full from your savings.

Ebe_Scrooge

As above, really, that's the most sensible option from a purely financial point of view.

I'm curious, though...

deltofe93 said:

She is now insured. 

WELLL... Come March '22 and she has to go to the vets, and comes out with a £2k vets bill. With probably another £1k by the time this is all finished. 

I put the £2k on my credit card.

Did the insurance not cover the vet's bill?  Having to pay an excess I can understand, but that seems a pretty hefty excess.

deltofe93 said:

My phone was stolen in London and then smashed (by said horse) so 2 insurance claims also added to the credit card. Balance as of today is £2049.

Again, are you talking about putting the excess on your credit card?

But that aside, as per the previous post - make use of the 0% deal on your card for as long as you can (may as well earn some interest on your savings for as long as possible), then clear it when (or just before) the 0% deal expires.  At that point, any interest you earn on your savings would be dwarfed by the interest you'd have to pay on any remaining CC balance.

deltofe93

I was a bit stupid here.. I had the vet out before I insured. I actually walked out with a £2k bill and £4k cost estimate for further treatment.

Insurance accepted part of her treatment, of which excess was £160, plus 17% of the remaining treatment cost (not been billed for the remainder yet) plus follow up treatment / reviews hence why I predict a further £1k. PLUS we moved yards and needed blood tests / antibody tests which is another £400, which again not been billed for yet! Nervous they're going to bill me and demand payment upfront. 

Yes I put the phone insurance on CC too hence why I keep paying into it but never seems to be reducing! 

I know it's self inflicted as horses are not a cheap business and tbh I wouldn't care as I have had credit cards / overdrafts before and paid them off. It's just that the family I'm living with are very sensible / stable people who would never dream of using credit (or so they say).

My OH doesn't know about this either.. I've told him it was all covered via insurance so need to get it paid off before we start applying for mortgages and it shows on credit history. My credit rating is pretty good.. it's sitting at 986 on experian.

How is this information discussed/presented back to buyers by banks or brokers when it comes to applying for mortgages? Do they tell the partners the ins and outs of credit / bank statements? 

I also work in a pub at weekends for extra £££ too. I know it will end at some point and it will get paid but just feel like it's just a never ending money spiral. 

Ebe_Scrooge

deltofe93 said:

I was a bit stupid here.. I had the vet out before I insured. I actually walked out with a £2k bill and £4k cost estimate for further treatment.

Insurance accepted part of her treatment

That's a bonus!  Pre-existing issues are normally excluded, count yourself lucky there.

deltofe93 said:

It's just that the family I'm living with are very sensible / stable people

Does the horse live in their stable?  Sorry, couldn't resist !!!

deltofe93 said:

My credit rating is pretty good.. it's sitting at 986 on experian.

The score given to you by Experian and the like means nothing.  It is not used - nor even seen - by any lender.  They take the data contained within your files, run it through their internal algorithms, and generate their own internal score.  Since the lending criteria used by each lender are different, confidential, and commercially sensitive, no-one is privy to them.  So, ignore your score.  But generally speaking, most lenders like to see a history of responsible borrowing and repayment.  Regular use of a credit card and always repaying in full every month is good (unless, like yours, it's on a 0% promotion, when paying the minimum is fine.  The 0% promo is shown on your report, so lenders will pretty much expect you to only pay the minimum whilst the promo is running).  Any missed/late payments on a credit card/loan/any credit agreement is a negative.

deltofe93 said:

How is this information discussed/presented back to buyers by banks or brokers when it comes to applying for mortgages? Do they tell the partners the ins and outs of credit / bank statements?

The lender will get a report from the CRA showing your credit history.  It shows how much debt you currently have, whether you've ever defaulted, how much credit you have available, address history, repayment history, electoral roll status, etc.  Important to note, it doesn't show how much savings you have - it's only concerned with your credit status.  You'll probably see your bank account on there - if you're a million quid in credit, it'll show zero.  If you're overdrawn by £10, you'll see a £10 overdraft showing.

They won't disclose any personal information to your partner.  Of course, the issue of whether you should discuss it with them yourself, for the sake of a harmonious relationship, is a different question entirely ......

As a side note, the credit reference agencies are not interested in your income (or savings, as previously mentioned), they deal purely with credit.  The lender, of course, may well ask you to provide evidence of income, as a separate issue.

born_again

Ebe_Scrooge said:

They won't disclose any personal information to your partner.  Of course, the issue of whether you should discuss it with them yourself, for the sake of a harmonious relationship, is a different question entirely ......

They won't, but when they ask for financial details from you & you are both their you are boxed into a corner. You can not lie at that point.
So do make sure you are open & upfront with you partner long before you start applying.

deltofe93

  it's the little things! 

Ok so I am fine to make min. payment which will help(?) credit score. What would the effect be if I was to do a balance transfer to another 0% interest card come December? 

And yes it does need to be discussed with OH at some point, just trying to figure out how to broach it. Any ideas? I'm thinking I give him the option of saying this has happened, this is the money I have and these are my options and go from there. 

[Deleted User]

Min payment won't help your credit score but, as above, that doesn't matter. Your debt is at 0%.

A BT would have the effect of extending the 0% period, but you need an exit strategy to pay it off.

deltofe93

wait I'm confused.. is my debt 0% because I am paying it off? 

What's a BT? 

[Deleted User]

Your debt is at 0%because you said you weren't paying interest. That means the rate is 0%.

A BT is a balance transfer.

Ebe_Scrooge

deltofe93 said:

wait I'm confused.. is my debt 0% because I am paying it off? 

What's a BT? 

Not meaning to sound patronising, but it would appear that a little explanation in how credit cards work is in order, to prevent future problems.

A bog-standard credit card will charge you interest on every purchase, from the day the transaction is statemented (hits your account) until you pay it off.  There is a get-out-of-jail-free card - if you pay off the FULL statement balance when you receive the statement (well, any time between receiving the statement and the "payment due" date), then the interest is waived.  So, used "correctly" like this, you should never need to pay any interest.

There are promotions offered by most card companies - 0% spending and 0% balance transfers.  On a 0% spending card, any purchases made during a set time-frame (for instance, the first 12 or 18 months of opening the card) will not be charged interest.  Well, technically, interest is charged, but it's charged at 0% rather than the 34% or whatever that they'd usually charge.  So in this scenario, you're OK to only pay the minimum each month for those first 12 or 18 or whatever months.  Sounds like this is the card you have got.  When the promotion rate expires, any remaining balance will start accruing interest at the card's standard APR.

A balance transfer card lets you transfer the balance from another card to it, and you'll be charged an interest rate of 0% (or if not 0% then a relatively low rate) for a set period of time.  Again, when the promotional rate expires, you'll start getting charged interest at the card's standard rate.

In either scenario, you should always budget to clear the card when the promotion expires - there's no guarantee you'll be able to transfer any remaining balance to another card.  If you can, then great (although there's usually a transfer fee to factor in), but you must never bank on being able to do so.

Hope this help to clarify things a little.