Taking a new approach to paying off Credit Card debt

YorkshireLAD83

Hi everyone. 
I'm a newbie who's never posted before and i'm looking for some advice. I’ve search a few times but never been able to find an answer.

I have some credit card debt that is very persistent, and I would like to start reducing it down as much as possible and I thought of potentially a clever idea (I’m also certain this idea has already been done and it’s not an original idea.)

Next month I’m planning to put all my disposal income on to my credit card and use the credit card throughout the month and use it for the usual things like, out for coffee, lunch at work, etc. Although I will be using the Credit Card throughout the month, I’m hoping by putting the bulk of my income on to my credit card, it would help me make better choices. For example, do I need by that jumper, do I need that extra coffee, etc. This then means the better choices I make the less debt I will have. (Hope that makes sense)

I want to know has anyone done this before? Is this a feasible thing or am I delusional and it might make things worse.

Any help advice or ideas would be greatly appreciated.

Thanks

Zuzi

Hello and welcome,

what do you mean by "put the bulk of my income onto my credit card", I am not sure how you want to do that?

What you are paying with your CC *is* from your income, so perhaps you can question the necessity of the purchases you make anyway. Good luck paying off the debt quicker, this place is full of great tips and as someone with debt you may like reading some of the posts in the Debt Free Wannabe section.

Ebe_Scrooge

YorkshireLAD83 said:

I have some credit card debt that is very persistent

The inference here is that you're not clearing the card in full every month, is that correct?

If so, then putting additional spending onto the card will be counter-productive and increase your debt, since you'll be paying interest on every single transaction.

YorkshireLAD83 said:

it would help me make better choices. For example, do I need by that jumper, do I need that extra coffee, etc.i

This is exactly the right approach - question every single purchase, and cut out everything that's non-essential.  But don't go putting more transactions on your card unless you're paying it off in full every month.  Cut your spending to the bone, throw every penny you can at the credit card debt, that's the way to tackle it.

One option is to see if you can get accepted for a 0% balance-transfer card, shift the debt to that then pay that off.  This will save you paying interest, but you absolutely MUST repay the balance transfer off in full before the promotional rate expires.

Another helpful resource is the Debt-Free Wannabe board on this forum.  Post up an SOA and you'll get plenty of helpful suggestions as to how you can make reductions in your expenditure.  By way of example:

YorkshireLAD83 said:

out for coffee, lunch at work,

Neither of these are essential.  "Going out for a coffee" is a "luxury" rather than a necessity, and taking a packed luck to work will almost certainly save you a few quid each day compared to buying lunch at work.  Often, if you're prepared to take a critical, objective look at your spending, it's not hard to make quite substantial savings which quickly add up and will allow you to nail the debt in no time at all

grumbler

Ebe_Scrooge said:

putting additional spending onto the card will be counter-productive and increase your debt, since you'll be paying interest on every single transaction.

Not worse than keeping cash in a current account and paying by a debit card.

grumbler

YorkshireLAD83 said:

Next month I’m planning to put all my disposal income on to my credit card and use the credit card throughout the month and use it for the usual things like, out for coffee, lunch at work, etc. Although I will be using the Credit Card throughout the month, I’m hoping by putting the bulk of my income on to my credit card, it would help me make better choices. For example, do I need by that jumper, do I need that extra coffee, etc. This then means the better choices I make the less debt I will have. (Hope that makes sense)

I want to know has anyone done this before? Is this a feasible thing or am I delusional and it might make things worse.

By using all or most of you disposable income towards reducing your CC balance ASAP you do reduce the interest you pay on on your CC.

Ebe_Scrooge

grumbler said:

Ebe_Scrooge said:

putting additional spending onto the card will be counter-productive and increase your debt, since you'll be paying interest on every single transaction.

Not worse than keeping cash in a current account and paying by a debit card.

I would argue that it is worse.  Assuming you're not clearing the credit card each month, then you're paying interest on every transaction.  At least using a debit card you're not paying interest (assuming you're not using an overdraft).

grumbler said:

YorkshireLAD83 said:

Next month I’m planning to put all my disposal income on to my credit card and use the credit card throughout the month and use it for the usual things like, out for coffee, lunch at work, etc. Although I will be using the Credit Card throughout the month, I’m hoping by putting the bulk of my income on to my credit card, it would help me make better choices. For example, do I need by that jumper, do I need that extra coffee, etc. This then means the better choices I make the less debt I will have. (Hope that makes sense)

I want to know has anyone done this before? Is this a feasible thing or am I delusional and it might make things worse.

By using all or most of you disposable income towards reducing your CC balance ASAP you do reduce the interest you pay on on your CC.

Can't disagree with this part - pay as much as possible to the card every month, but I'd advise that they try not to put any further transactions on the card, if possible, until it's cleared.  OP would still be better off to reduce his overall expenditure and go all-out to clear the CC ASAP.  Once clear, then by all means use it for routine expenses as long as it's always cleared in full every month going forwards.

pogg000

Surley by paying upfront will reduce interest at the end of the month, as it is calculated daily??

FreedomBringsPeace

I would urge you to look on you tube at Dave ramsey baby steps 1 - 3 is pertinent for you. 

grumbler

Ebe_Scrooge said:

grumbler said:

Ebe_Scrooge said:

putting additional spending onto the card will be counter-productive and increase your debt, since you'll be paying interest on every single transaction.

Not worse than keeping cash in a current account and paying by a debit card.

I would argue that it is worse.  Assuming you're not clearing the credit card each month, then you're paying interest on every transaction.  At least using a debit card you're not paying interest (assuming you're not using an overdraft).

The interest you pay is on the running balance. The earlier you reduce it, the less interest you pay.

Ebe_Scrooge

pogg000 said:

Surley by paying upfront will reduce interest at the end of the month, as it is calculated daily??

Absolutely.  But the OP's original question was about:

YorkshireLAD83 said:

use the credit card throughout the month and use it for the usual things like, out for coffee, lunch at work, etc.

My interpretation of that was that he currently pays for those things by debit card or cash, but he's going to switch to using CC.  Yes, making a lump-sum payment to the card in advance will result in less interest than they would otherwise pay - but the bottom line is, if they're not clearing in full then they're still paying some interest.  If the intention is to get rid of the CC debt then they need to stop using it and pay off the balance.

grumbler

OK, let's say the OP spends £500/month and the disposable income is £1000.

I think it's obvious that it's better to pay £1000 to the CC and then use it to spend £500 than to spend £500 on a debit card and then pay the remaining £500 to the CC.

ETA: even if it's £500 and £500, it's still not worse if £500 is spent instantly or better otherwise.