Help me decide whether to pay off my credit card!?

studavis

Hi guys! I've been meaning to come on here for a while and ask this pretty straight forward question. I'm sure a number of you will have been in this situation before, so any advice is appreciated. It's a pretty simple thing, so I'll crack on...

My current credit card debt runs to around £850. I transferred it about 9 months ago on a 0% deal, but that is now running out in the next few weeks. In those 9 months I have bought a few things on it (concert tickets mostly) and to be honest have been making the minimum payment on it most months, sometimes some more, and that has paid off the spending on it in that time period.

My current account is pretty healthy, I put away a certain percentage each month into my savings (more on that in a minute) and the rest takes care of my outgoings (bills, rent etc). I do have quite a healthy cushion in the current account in case of emergencies (car repair etc).

Over the years, particularly when living at home with the folks, I managed to save up a fair bit on my savings account, and that sits just under 4 grand. I very very rarely have to touch this and to be honest it just sits in there earning me interest.

The simple question I have is this.. Should I pay off my credit card in full with the money in my saving account in bulk, or have a strategy to pay it off month by month till it's cleared?

If you have got any other questions just let me know, I'll do my best to answer them without giving away my full financial history! for the record, I'm a 27 y.o. male in full time employment, my biggest debt being my student loan!

Thanks in advance!
:T

bananakinz

Go for it pay it off

When the 0 % ends it'll probably be costing your more interest than you'll be earning on your savings! You'll soon have the money back in your savings account

dudleyboy

It's taken over 4 years to make your first post?! What have you been waiting for??

If I were you mate I'd see if I could find another 0% credit card and transfer the balance, preferably fee free. Then, I'd set up a Direct Debit for equal installments so that it's paid off by the end of the 0% (say, £142 pcm for a 6 month 0% deal). Just don't spend on this card like you did on your last one! After the 6 months it'll be completely gone, it'll cost you nothing to do it, and you will have carried on earning interest on that money in your savings account in the meantime.

However, if you can't find a decent 0% deal or one that is fee free then I'd do what bananakinz suggests and just pay it off in full.

studavis

Both good food for thought options - thanks! I think I'm erring more on the side of paying it all off now, I have been card tarting it for about the last 6 years and I'm struggling to find a decent CC deal that I'm eligible for.

Thanks!!

Tirian

If the savings are in a regular account, you will be getting taxed on the interest.

Let's say your savings account pays 5.5% interest. After tax this will be something like 4.15%.

For a balance transfer deal you will be looking at approximately 2.5%-3% fee. Also, you will probably be charged interest on that fee at the standard APR of, say 16% or so, which will bump the cost of the transfer up to 3.25% -3.5%.

So, all said, might stand to gain about 0.5% by doing a BT rather than paying off. Not worth the hassle in my opinion. Especially given that on your balance that's likely to amount to the grand old sum of about £4-£5. Work an hour at minimum wage and you've made more than you'll make like this, and save yourself the hassle of filling in all the forms.

Burlesque_Babe

I would pay it off to avoid a BT fee. 0% BT fees are thin on the ground and you'll probably pay less tax on your savings.

Hope you have some in a tax free ISA though

sheslookinhot

Get another 0% card, and resolve to make it your last. Pay it off over the length of the 0% term. Do not take money out an interest paying account to pay it off.

I owed £7,200 4 years ago and by not spending any more using cc's and paying a regular payment it is now down to £600. I will clear this by August.

It seems the debt is barely noticable for you, just plan to pay it off soon without adding to it.

Tiglet

If you've transferred a balance on to your card and then spent on it as well, then you'll be paying interest on the extra spending above the balance transfer. When you pay off part of the balance, they will reduce the part that is interest free first. That means that, unless you clear off the whole of the balance, you'll be paying interest on those concert tickets forever.

Either pay off the whole of the balance or transfer it to another card with a 0% rate. If you do transfer it, make a point of never spending anything on that card, otherwise you'll be in the same position again.

studavis

Hi guys, thanks for the feedback, all good! Yup, I am looking to stop using my credit card, hence me wanting to clear the balance and forget about using them again, except in emergencies! I think I am going to clear teh balance, maybe not all at once but probably over two months, two payments, and that takes me to the end of the 0% deal nicely. I think then I'll be back on here to find out the best way to invest a lump sum every month for the best returns!!

Thanks again!

lauradora

Pay off the card!! You'll pay more interest on it than you receive in savings so get rid. Otherwise apply for another 0% APr card and transfer the balance.:D

mhe

Pay off the card with your savings so you dont pay a BT fee.
Then close account so cant spend on a CC again.