Velocity Banking

rlm1234

I'll try to address some of the comments. If you make a payment on to your credit card of £1k, this will of course reduce the balance, eg if you owe £3k, balance will go down to £2k. Shopping & petrol are bought gradually over the course of the month therefore the interest for those purchases will only be charged as you make your purchases at a daily rate (I think). You have to eat etc and so you might as well do so in a way that works better for you.  In the meantime, you don't need to make that direct debit of £200 for the cc because you've already paid the £1k for your expenses. In addition, your expenses will also be less than £1k, they will actually only be £800, so the extra money can go towards the cc debt. Its just basic maths and you're not robbing Peter to pay Paul, your just utilising your credit in a better way. It's just maths, it might not be right for everyone but it's really helped me in my situation.   

TheAble

I don't see how it's any different from paying the £200 DD and then using £800 in cash for your expenses. Fair enough if it works for you but quite what this method is achieving (other than perhaps a few air miles) is unclear.

Martico

Thanks - I can see a scheme working to an extent, but it needs iron discipline and isn't for all.

As I understand, on payday you pay all minimums. And then you overpay one CC with your budgeted supermarket etc spends for the month. And use that CC for those spends, and go again. With iron discipline I can see that helping. As long as you know that it doesn't negate the need for tight budgeting. It's a marginal gain, but a marginal gain is a gain. As long as the focus is on debt reduction rather than debt shuffling, I can see it having a benefit.
I still suspect that it's fraught with danger for those that need to change their mindset away from credit, so remain sceptical and would still advocate clearer strategies.

(Edit: obviously, for debt reduction to play a part, this strategy has to take into account a payment that exceeds the minimum (and the prevoius month's spend!) by a fair chunk - you need to see the total going down)

rlm1234

TheAble said:

I don't see how it's any different from paying the £200 DD and then using £800 in cash for your expenses. Fair enough if it works for you but quite what this method is achieving (other than perhaps a few air miles) is unclear.

Hi, it is different, if I were you I would YouTube it.  They are mainly US videos but it will still make sense, I think I you see it visually you will understand it better. 

rlm1234

Martico said:

Thanks - I can see a scheme working to an extent, but it needs iron discipline and isn't for all.

As I understand, on payday you pay all minimums. And then you overpay one CC with your budgeted supermarket etc spends for the month. And use that CC for those spends, and go again. With iron discipline I can see that helping. As long as you know that it doesn't negate the need for tight budgeting. It's a marginal gain, but a marginal gain is a gain. As long as the focus is on debt reduction rather than debt shuffling, I can see it having a benefit.
I still suspect that it's fraught with danger for those that need to change their mindset away from credit, so remain sceptical and would still advocate clearer strategies.

(Edit: obviously, for debt reduction to play a part, this strategy has to take into account a payment that exceeds the minimum (and the prevoius month's spend!) by a fair chunk - you need to see the total going down)

Personally I've found it to be a much easier way to deal with my debt.  Although I do think you're right in that it's not a green light to overspend and that learning to manage a budget should also play a part, so maybe not right for some.  All I can say is that I feel so much more in control and so much happier because of it.  

rlm1234

TheAble said:

It's fascinating stuff. Direct debit to pay balance in full in other words?

Hi, not quite.  Sorry I didn't answer you before, I'm new to this forum and how it works!  So I've answered elsewhere.  But it mainly applies to people who have one or more credit cards with balances on that they want to pay off quickly. 

Martico

rlm1234 said:

Martico said:

Thanks - I can see a scheme working to an extent, but it needs iron discipline and isn't for all.

As I understand, on payday you pay all minimums. And then you overpay one CC with your budgeted supermarket etc spends for the month. And use that CC for those spends, and go again. With iron discipline I can see that helping. As long as you know that it doesn't negate the need for tight budgeting. It's a marginal gain, but a marginal gain is a gain. As long as the focus is on debt reduction rather than debt shuffling, I can see it having a benefit.
I still suspect that it's fraught with danger for those that need to change their mindset away from credit, so remain sceptical and would still advocate clearer strategies.

(Edit: obviously, for debt reduction to play a part, this strategy has to take into account a payment that exceeds the minimum (and the prevoius month's spend!) by a fair chunk - you need to see the total going down)

Personally I've found it to be a much easier way to deal with my debt.  Although I do think you're right in that it's not a green light to overspend and that learning to manage a budget should also play a part, so maybe not right for some.  All I can say is that I feel so much more in control and so much happier because of it.  

Learning to manage a budget should always be number one, whatever strategy you deploy.

rlm1234

Brie said:

So you spend as much as possible on your card and pay it off in full each month?  Nothing the matter with that.

Oh wait you mention interest. So you're not paying it off in full.

Well one thing not all cards pay attention to what you pay during the month and will still take your DD no matter what.  But yes the more money you pay and the sooner you pay it the less interest will accrue, assuming there's an interest bearing amount.

My worry would be that given you already have a balance on the card and are being charged interest anything that's going to allow you to spend even more on the card and potentially get even more in debt is dangerous.  And as you haven't paid everything off from the last statement it means that interest will accrue on new "purchases" from the first day rather than giving you the 47 (or whatever) days interest free. 

Nope - don't like it.

Hi, sorry I didn't answer before, I'm new on here!  I think you may have misunderstood.   I've answered elsewhere, but basically if you pay the £1k expenses on your credit card before you spend, you will lower your cc balance by £1k and the expenses go out gradually.   If your dd is £200, you have covered it with your £1k payment, also your expenses will be £200 less.  It's easier to explain it visually.  Obviously good budgeting still comes into it.

rlm1234

p00hsticks said:

 rlm1234 said:

In doing this, the credit card payment will be swallowed up in the payment.  So for example, if the cc payment is usually £200 per month, it will be paid when you make the payment of £1,000, thereby increasing your cash flow per month (meaning you would have an extra £200 to play with). 

i don't follow this bit about the £200 monthly payment, unless you are suggesting that you have a significant outstanding credit card balance at the start of the experiment that you are making £200 (minimum ?) payments towards. . If this is the case, then unless you are in a 0% interest offer period, you'll still be left with a balance at the end of the payment period and so will be paying interest on all your purchases, and are no longer making any inroads into that initial debt  .

Hi, sorry I didn't answer earlier, I'm new on here.  You've partly got it, perhaps I need to explain more clearly.  Please see my other answers, if still not clear try youtubeing it.

rlm1234

Martico said:

rlm1234 said:

Martico said:

Thanks - I can see a scheme working to an extent, but it needs iron discipline and isn't for all.

As I understand, on payday you pay all minimums. And then you overpay one CC with your budgeted supermarket etc spends for the month. And use that CC for those spends, and go again. With iron discipline I can see that helping. As long as you know that it doesn't negate the need for tight budgeting. It's a marginal gain, but a marginal gain is a gain. As long as the focus is on debt reduction rather than debt shuffling, I can see it having a benefit.
I still suspect that it's fraught with danger for those that need to change their mindset away from credit, so remain sceptical and would still advocate clearer strategies.

(Edit: obviously, for debt reduction to play a part, this strategy has to take into account a payment that exceeds the minimum (and the prevoius month's spend!) by a fair chunk - you need to see the total going down)

Personally I've found it to be a much easier way to deal with my debt.  Although I do think you're right in that it's not a green light to overspend and that learning to manage a budget should also play a part, so maybe not right for some.  All I can say is that I feel so much more in control and so much happier because of it.  

Learning to manage a budget should always be number one, whatever strategy you deploy.

Yes I agree, I'm not advocating going on a spending spree.  but it does make sense to learn how to use credit cards to our own advantage, instead of the banks.