Which debt to prioritise?

dan1212

Hi there. I'm hoping you can give me some advice on how to tackle two debts I have in the most effective way.

I have £11,000 of credit card debt across two cards
Natwest: £7740
HSBC: £3360

Both of these have interest free periods ending in December this year. Natwest is 08/12 and HSBC is 12/12 so not much difference and there isn't too much urgency.

Before this year I was chipping away at both as well as clearing other debts without much thought but with the interest periods ending I feel I probably need to be a bit more strategic in how I look at these. 

I can allocate currently £200 across both cards which is more than the minimum payment on each. In April I will receive roughly £200 which I plan to put towards the debt. I will also be able to allocate an increased amount of £250 to the total debt. 

So I have ten more statements to pay before I go on to paying interest at the normal rate which I want to avoid. Including three more allocations of £200 (including my £200 one off payment from my employer in April) and then eight of £250 after April I will have cleared £2,600 of debt leaving £8,400 of debt. The option to allocate more money to the debt is currently not available. It might be, but I would like to work for now on the assumption it probably won't. 

My question is how do I allocate this in the most cost efficient way? My inclination is to throw as much as possible at the smaller HSBC total, but then this leaves a larger amount to transfer from the Natwest card which may prove harder to do in terms of credit limits and will incur a likely bigger fee. I get offers from both my existing cards, but they are rarely that competitive. I have an MBNA card with an £11,000 credit limit on, but don't receive offers for this. If I applied for a new MBNA card with an offer on, would they likely switch my larger credit limit over to the new card?

Any advice greatly appreciated.

Vinknut

In lieu of a full SOA, what are the APRs and monthly payments on them all? Including the APR that the two credit cards are likely to be on once the 0% offer ends.

enthusiasticsaver

Given that you will not be able to clear either of the debts within the interest free period I think I would focus more on the bigger card and try to get the balance down on that as you will find it easier to get the lower one moved in December. As the Nat West card is more than double the HSBC card I would allocate the £200 with a split maybe of £125 to Nat West and £75 to HSBC.  Put the additional payments to Nat West. 

Essentially though you are looking at it taking you around 4-5 years to clear those credit card debts at £250 each month. You are unlikely to get a big limit with a new card so I would not apply for an MBNA card at this point but just focus on getting the two cards you already have down as low as possible until the deals are almost up in December. 

enthusiasticsaver

So in December the HSBC card should be down at £2460 which should be easy to move to another deal.  

The Nat West card will still be relatively high at £5590 but maybe still doable to get a suitable limit to move or maybe you may be able to split over two cards if you get a higher limit for the HSBC BT when you come to transfer it. 

Martico

I'd hold off on cancelling the MBNA card for now - I've found that they still offer fairly regular 0% BT deals, to me at least. They're not the best rates, but you never know

dan1212

Vinknut said:

In lieu of a full SOA, what are the APRs and monthly payments on them all? Including the APR that the two credit cards are likely to be on once the 0% offer ends.

HSBC is 21.9% and currently £86.25 minimum payment (from my last statement)
Natwest is 23.9% and £78

RAS

dan1212 said:

Vinknut said:

In lieu of a full SOA, what are the APRs and monthly payments on them all? Including the APR that the two credit cards are likely to be on once the 0% offer ends.

HSBC is 21.9% and currently £86.25 minimum payment (from my last statement)
Natwest is 23.9% and £78

Although there is not a lot in it, aim to pay over the minimum on HSBC, as that looks a lot better, even if it's only rounding up to the next fiver. And pay everything you can off the NatWest card as it has the higher interest rate.

From June onwards do soft checks to see if you can get a transfer, ideally 0%, but if that's not available, anything substantially under 15%.