Cutting interest debt

OT7Stan

Hi all, I am VERY new to the forum. I am wondering about the best way to handle an opportunity to possibly cut interest debt but without shooting myself in the foot based on the percentage of credit usage.

I have 2 credit cards and I have been handling them well and working toward paying them off entirely. I also have a Paypal credit account. The Paypal credit account has recently offered to give 4 months interest free on purchases. I have made two 'purchases' on Paypal basically moving debt to that account in the form of interest free purchases. I was considering paying off the credit card with a final 'purchase' to the Paypal credit account. 

My fear is that the amount of debt/usage on my Paypal credit account will then seem high (maybe 70+ %), while the other 2 cards would be paid off and they do report monthly. I wonder if that would then have a negative impact on me, rather than helping to cut the interest debt percentage in a helpful way. Or would the reported usage be averaged over the total amount of potential debt (if all 3 accounts were maxed out)?

I apologise if this is confusing, by the way. If I need to clarify further, please let me know. Thanks!

Brie

The important thing from your point of view is to cut the interest as much as possible so that the money you pay gets rid of the debt rather than merely servicing it.  

The worry is that if you max out the paypal account what happens when the interest free period is over?  If it's like with a CC then the interest rate will be very high so you either have to ensure you pay that all off before the 0% disappears or you have a 0% money transfer available on one of the cards so you can move the debt back there and continue to pay it all down.  

Frankly I've never really understood the percentage credit use thing.  I mean obviously if you have £5k of credit available and are using it all then a new creditor might wonder if you are a good risk or not.  If you have £5k credit available and are using it over 3 creditors or only on one with the others not being used is, to me, immaterial.  

Most importantly - are you always paying what is expected of you every month?  If you aren't then creditors will stay away.  

eskbanker

OT7Stan said:

I was considering paying off the credit card with a final 'purchase' to the Paypal credit account.

Is that actually possible?

OT7Stan said:

Or would the reported usage be averaged over the total amount of potential debt (if all 3 accounts were maxed out)?

The ratio that's of interest to potential lenders is total debt versus total available credit, i.e. across all credit facilities.

CliveOfIndia

OT7Stan said:

I have made two 'purchases' on Paypal basically moving debt to that account in the form of interest free purchases. I was considering paying off the credit card with a final 'purchase' to the Paypal credit account.

I'm not sure I fully understand - a purchase is different to a balance transfer, if that's what you're getting at?

But if you've been given a BT offer then I wouldn't worry too much about usage ratios.  Any promotional rate is flagged as such on your credit report, and it makes eminent sense to move an interest-bearing debt to a 0% debt if you're able.

OT7Stan

Thank you all for that insightful and helpful information. I do not know how to respond to you individually, but wanted to pass on my appreciation. Best wishes!

grumpy_codger

CliveOfIndia said:

OT7Stan said:

I have made two 'purchases' on Paypal basically moving debt to that account in the form of interest free purchases. I was considering paying off the credit card with a final 'purchase' to the Paypal credit account.

I'm not sure I fully understand - a purchase is different to a balance transfer, if that's what you're getting at?

But if you've been given a BT offer then I wouldn't worry too much about usage ratios.  Any promotional rate is flagged as such on your credit report, and it makes eminent sense to move an interest-bearing debt to a 0% debt if you're able.

Does "any" apply only to BTs or to purchases as well? If the latter, is Paypal any different from CCs in this respect?

Nasqueron

grumpy_codger said:

CliveOfIndia said:

OT7Stan said:

I have made two 'purchases' on Paypal basically moving debt to that account in the form of interest free purchases. I was considering paying off the credit card with a final 'purchase' to the Paypal credit account.

I'm not sure I fully understand - a purchase is different to a balance transfer, if that's what you're getting at?

But if you've been given a BT offer then I wouldn't worry too much about usage ratios.  Any promotional rate is flagged as such on your credit report, and it makes eminent sense to move an interest-bearing debt to a 0% debt if you're able.

Does "any" apply only to BTs or to purchases as well? If the latter, is Paypal any different from CCs in this respect?

As we've previously advised you, a BT/MT or a 0% purchase card card is not the same as a normal card, the balance will be shown as a promotional rate, not a standard one. Part of this though is the problem with mixing spending and transfers which can mess up the rates and cause issues with interest if you use a specific balance transfer card for spending.