Advice on minimum C.C payments

trickydicky14

I’ve just acquired a new credit card from HSBC with 20 months interest free on purchases. I intend to save the money, make some interest and pay off the card nearer the time. I know I need to pay the minimum each month, I think it’s around 2.5%. I’ve read some where that it’s best to pay a bit more than minimum, is this true and if so why. Obviously I want to pay as little as possible so I can max the saving potential.

TheSpectator

trickydicky14 said:

I’ve just acquired a new credit card from HSBC with 20 months interest free on purchases. I intend to save the money, make some interest and pay off the card nearer the time. I know I need to pay the minimum each month, I think it’s around 2.5%. I’ve read some where that it’s best to pay a bit more than minimum, is this true and if so why. Obviously I want to pay as little as possible so I can max the saving potential.

Paying the minimum is a flag on your credit report and some suggest paying £1 more than minimum. I've never found it be an issue paying the minimum on a promotional offer (0%) as that is also noted on your credit report.

Brie

Should you be on a tight rope with your finances and potentially will need more credit in the near future then it's better to show you are managing your money.

Your window to make purchases is likely to be 60 or 90 days or similar so max it up during that period.

Have a minimum DD set up immediately and then see what amount you have on your card at the end of the 60/90 days.  Then you have 2 options.  Divide that amount by the number of months left on the offer (maybe 17 months left so div by 17) and set that up as your DD.  That way you'll have a set amount each month which makes budgeting easier and ensures that the full amount is paid off by the end.

OR wait til you see what the highest minimum payment will be (after the 60/90 days) and set a DD just above that.  So if it's £49 minimum set the DD to £50.  Again it makes it easy to budget and doesn't show up as "just paying the minimum" should someone need to look at your credit history.  You can adjust it down ever few months if you wish so when the minimum is £39 you can reset the DD to £40.  

If on the other hand your income is massively more than your expenditure no one is going to care what your DD is along as it is always paid.

NOTE!  Do ensure you don't use the card for any purchases after the initial period as those purchases will be subject to whatever high interest rate the card has and will be charged from day one of the purchase.  This will be because you haven't cleared your balance from the previous month in full.  If you find you make a mistake with this make an immediate payment to clear whatever late purchases were made as they will clear first ahead of the 0% ones.  Hope that makes sense,   And sorry if this is stating the obvious.

trickydicky14

Brie said:

Should you be on a tight rope with your finances and potentially will need more credit in the near future then it's better to show you are managing your money.

Your window to make purchases is likely to be 60 or 90 days or similar so max it up during that period.

Have a minimum DD set up immediately and then see what amount you have on your card at the end of the 60/90 days.  Then you have 2 options.  Divide that amount by the number of months left on the offer (maybe 17 months left so div by 17) and set that up as your DD.  That way you'll have a set amount each month which makes budgeting easier and ensures that the full amount is paid off by the end.

OR wait til you see what the highest minimum payment will be (after the 60/90 days) and set a DD just above that.  So if it's £49 minimum set the DD to £50.  Again it makes it easy to budget and doesn't show up as "just paying the minimum" should someone need to look at your credit history.  You can adjust it down ever few months if you wish so when the minimum is £39 you can reset the DD to £40.  

If on the other hand your income is massively more than your expenditure no one is going to care what your DD is along as it is always paid.

NOTE!  Do ensure you don't use the card for any purchases after the initial period as those purchases will be subject to whatever high interest rate the card has and will be charged from day one of the purchase.  This will be because you haven't cleared your balance from the previous month in full.  If you find you make a mistake with this make an immediate payment to clear whatever late purchases were made as they will clear first ahead of the 0% ones.  Hope that makes sense,   And sorry if this is stating the obvious.

Thanks for some useful information, I plan to use around 75% of my limit within the first 30 to 60 days. I have set up a minimum payment to start with and as you say, I will look at my payments after 60 days and add a few pounds to the minimum and leave it at that. I’ll have more than sufficient funds to clear the balance when needed and hopefully a bit of interest on my savings.

km1500

does this HSBC card have a 60/90 day period ?

Brie

km1500 said:

does this HSBC card have a 60/90 day period ?

Yes - always necessary to check the T&Cs and ring if you can't see the obvious.  And take note of the name, date, time of the call so you know who to point the finger at if they get the info wrong.  (not in a nasty way but just so you're not out of pocket.)

QrizB

km1500 said:

does this HSBC card have a 60/90 day period ?

I caan't speak for the OP's card, but my HSBC card with 20 months interest-free on purchases (this one, with the £25 cashback) doesn't have an initial period. It's interest-free for all purchases in those 20 months.

kempiejon

When I use interest free balance transfers or spending deals I set a direct debit at a fixed amount a bit above the minimum percentage. For example £5k for 20 months, minimum payment of 2% outstanding would be £50, reducing each month as the outstanding falls. I'd pay a fixed £50 for all 20 months £1000 leaving £4000 to settle from the savings account after month 19 to reduce the risk of interest. But for all the time the debt is interest free it's academic, I like it for neat accounting but it would make slightly more interest in the savings account paying just the min and settling at the last minute before the interest becomes due..

Archerychick

i usually round mine up to the nearest £5 

trickydicky14

QrizB said:

km1500 said:

does this HSBC card have a 60/90 day period ?

I caan't speak for the OP's card, but my HSBC card with 20 months interest-free on purchases (this one, with the £25 cashback) doesn't have an initial period. It's interest-free for all purchases in those 20 months.

Yes that's the one I have with the £25 cash back

DullGreyGuy

trickydicky14 said:

I’ve just acquired a new credit card from HSBC with 20 months interest free on purchases. I intend to save the money, make some interest and pay off the card nearer the time. I know I need to pay the minimum each month, I think it’s around 2.5%. I’ve read some where that it’s best to pay a bit more than minimum, is this true and if so why. Obviously I want to pay as little as possible so I can max the saving potential

Whilst CRAs may pour snake oil in your ear and claim their "credit score" is important the reality is no one making a lending decision uses it. In reality they provide your credit history and each company makes its own decision based on its experience and what it considered a good or bad risk.

If you were not in a 0% promotional period many would think just paying off the bare minimum and incurring interest is strong signs of those not in a happy place. There are certainly some who state that in a 0% period is materially different and not the same issue. If you know who you want to borrow from in the next 92 months and can get them to divulge their lending criteria and what it will be when you next borrow then you could make an informed choice.

Assuming you are more average than that it may be prudent to pay a little more than the minimum payment. Depending on if you are still spending on the card or how bad your memory is it may or may not be complex to do as many have relatively limited options on the automatic DD