Which card to pay off first..

del1rious

Hello all, 

I have gotten in a huge mess with money the past few years and am now finally tackling the problem. 

I have reigned my spending in so have gotten out of the cycle of spending on credit cards every month and now want to tackle the debt. 

They are as follows:

Tesco bank - 3700 (APR 19.9%)
Amazon Credit Card - £2500 (APR 20.9%)
Barclaycard - 3900 (0% at the moment but will be 24% after 22 months)

I am not sure whether it is best to focus my efforts on the barclaycard at the moment (making minimum payments on the others) to utilise as much of the 0% interest period as possible, or whether I should tackle the other two first to get the interest down. Or will this make no difference long term?

Any advice greatfully received!

kimwp

General advice is pay off the ones with the highest interest first. 

What is the min payment on each card and how much can you put towards paying off your debt?

Exodi

Since this is effectively a maths problem, could you let us know what minimum payments typically are on these cards, and what overpayment you may be able to make?

Between Tesco & Amazon, you are currently paying over £100 in interest every month.

EDIT: but without numbers, as kimwp says above, my money would be on it working out cheaper to pay off the current highest interest bearing loan first (and swap when the other comes of 0% if you can't balance transfer).

Martico

100% pay down the ones that are charging interest at the moment, pay the Barclaycard at minimum plus a quid or so. When the Barclaycard is approaching the end of its 0% period, try to swap onto another 0% deal if you can't pay it off in full by then.

Right now:
For every £100 that you pay Tesco, that's £19.90 less you pay in interest every year.
For every £100 that you pay the Amazon card, that's £20.90 less you pay in interest every year.
For every £100 that you pay Barclaycard, that's £0.00 less you pay in interest every year. 

MalMonroe

Hi, you could also try contacting one of the free debt help agencies, like StepChange - https://www.stepchange.org/

It's a free phone call and free advice and if nothing else, they do offer reassurance.

I've used them in the past, they're really good at what they do and best thing of all, they are non-judgemental.

I agree that when tackling debt, it's always best to pay off the ones with the highest interest first. If it's any consolation, I don't think your debt is too large, as long as you are now determined to spend no more on credit cards and tackle it to get rid of it, which it seems you are. 

Good luck.

del1rious

Thank you all for your advice so the minimum payments are as follows (or thereabouts)

Tesco - 96
Amazon - 130
Barclaycard - 125

Realistically, I have about 450 to throw at this problem every month

Exodi

del1rious said:

Thank you all for your advice so the minimum payments are as follows (or thereabouts)

Tesco - 96
Amazon - 130
Barclaycard - 125

Realistically, I have about 450 to throw at this problem every month

Thanks, the sums look pretty good.

Assuming you intitally pay £96 towards Tesco, £229 towards Amazon and £125 towards Barclaycard (=£450), you would have paid off your Amazon card at the end of year 1.

Assuming you then add the additional £229 towards Tesco, (so £325 Tesco, £125 Barclaycard), you would have paid off the Tesco card around month 22 - which is extremely convenient as this is when your 0% offer expires.

You'd then have £450 to put towards the outstanding £1150 Barclaycard balance - paying it off in just under 3 months.

If you were able to commit £450 towards these debts every month, you would be debt free in just over 2 years.

Martico

Good luck - it's gonna take you a good while to clear that. Interest on both Tesco and Amazon will make it seem like two steps forward, one step back all the time. If it was me in this position:

I'd pay 100 pm to Tesco, 126 pm to BC (this can fall a bit every month as the min repayment falls), the rest to Amazon.
I'd look to see if I could get a 0% transfer deal for at least part of the Amazon card, then pay that at minimum.
I'd look to ways to raise more money to throw at Amazon. Go for surveys (Prolific Academic gets me around £25-30 a week at the moment), go for current account switching (see Martin's guide) for the one-off £150-175 welcome bonuses, sell unwanted stuff around the house, if possible make my budget tighter than it currently is and throw any extras at the debt. I'd also look at trying (it's tough) to build up an emergency fund so that you don't dip into the cards if an unexpected cost comes up. 

Exodi

Martico said:

I'd also look at trying (it's tough) to build up an emergency fund so that you don't dip into the cards if an unexpected cost comes up. 

Silly to save up for an emergency fund (which you might earn 2% savings interest on) while paying ~20% interest on existing debt.

If an emergency came up, they should just put it on one of the cards they're currently paying off.

kimwp

Exodi said:

del1rious said:

Thank you all for your advice so the minimum payments are as follows (or thereabouts)

Tesco - 96
Amazon - 130
Barclaycard - 125

Realistically, I have about 450 to throw at this problem every month

Thanks, the sums look pretty good.

Assuming you intitally pay £96 towards Tesco, £229 towards Amazon and £125 towards Barclaycard (=£450), you would have paid off your Amazon card at the end of year 1.

Assuming you then add the additional £229 towards Tesco, (so £325 Tesco, £125 Barclaycard), you would have paid off the Tesco card around month 22 - which is extremely convenient as this is when your 0% offer expires.

You'd then have £450 to put towards the outstanding £1150 Barclaycard balance - paying it off in just under 3 months.

If you were able to commit £450 towards these debts every month, you would be debt free in just over 2 years.

Does this include the interest? When I started thinking about the maths, I couldn't come to a conclusion about how to figure the interest in.

kimwp

Exodi said:

Martico said:

I'd also look at trying (it's tough) to build up an emergency fund so that you don't dip into the cards if an unexpected cost comes up. 

Silly to save up for an emergency fund (which you might earn 2% savings interest on) while paying ~20% interest on existing debt.

If an emergency came up, they should just put it on one of the cards they're currently paying off.

Agreed, it doesn't make sense financially.