Paying off credit cards by taking a mortgage holiday.

GOBBLEDYGOOCK

Hi all
This is my first post so you'll have to bear with me.
I currently have two credit cards.
A virgin card which has a balance of £2,400, interest free for 16 more months (recent balance transfer). Minimum payment £74.14
A barclaycard which has a balance of £2900, (£1291.54 interest free) estimated interest per month £19.62. Minimum payment £67.00.
I really want to get rid of these cards and I'm wondering if I should take a 7 month payment Holiday from my Nationwide mortgage to pay off the cards.
The mortgage is fixed for another 4 years at 5.58%. The mortgage payment would start again but would be £50 more expensive for the remainder of the term.
Am i doing the right thing?
Any help would be greatly appreciated.

spaceman5

so over 4 years you will be paying £2400 more than you are now

YorkshireBoy

GOBBLEDYGOOCK wrote: »

A virgin card which has a balance of £2,400, interest free for 16 more months (recent balance transfer). Minimum payment £74.14

The minimum payment on this card will be £25 per month from the second payment onwards.

CannyJock

GOBBLEDYGOOCK wrote: »

Am i doing the right thing?
Any help or advice would be greatly appreciated.

Almost certainly not.

If you're in a position where you want to buy yourself 7 months, have you transferred the maximum from the Barclaycard onto the Virgin Money card? Like YB says, the minimum payment from month 2 onwards is only £25.

Can you use the Virgin money card to make the minimum payments on the Barclaycard for a few months - does it count as a payment?

If you're in really dire straits, have a look on the Debt Free Wannabee board for some money saving tips.

GOBBLEDYGOOCK

Thanks for the replies guys. Made mistakes in the past with stuff like this so its great to get some advice. I thought about transferring the Barclaycard amount on to the Virgin card but I'll get charged 3% for the privilege.
I don't mean to be a noob but how will my minimum payment be £25?
I guess the best thing to do is to put the Barclaycard balance on to the Virgin card and go with it.

Martinslovechild

Hiya Gobbledygoock and welcome to MoneySavingExpert.com.

Firstly - can you supply a bit more info please:-

• The interest rate on the Barclaycard. You say that £1291.54 of the balance is interest-free; does this indicate that the remainder is being charged at a higher rate? If so, what's the rate?
• What is the remaining term on your mortgage?
• The £50 you quote - is this amount per month or per annum and will this payment be required for the remainder of the term?
• Have you examined all other options to increase your disposable income, e.g. changing gas/electric, switching to a water meter, changing landline provider, changing mobile provider/deal, registering with cashback sites for internet purchases, cashback credit card (e.g. Egg Money) for purchases, changing savings account for higher rate, opening a cash ISA, using comparison websites for house/car/travel insurance etc?
• Are you in full-time employment?
• Are you a higher-rate taxpayer?
• Are you married? If so, does your partner work? What is their tax status?

I realise that some of these questions are probing, but I need this information to be able to ascertain the best route forward for you.

Please do not supply any personal information regarding accounts - this is not necessary, but it would help me if you could answer the above questions as there may be some possibilities that come to light once I have the full picture.

whowants2brich

My initial thoughts are:

1) The £2,400 interest free card for 16 months. Don't pay any of it off, however ensure that you can put at least £200 a month into a high-interest savings account (a regular savings account would be ideal). That way, at the end of the 16 months, you pay off the BT - and gain interest in the meantime. If this doesn't start until the summer then that's still 12 months @ £200. The main thing is point two, as follows...

2) The Barclaycard £2,900. Any money you throw at this account will pay off the cheap amount first. Your best bet would be to pay the lot off, ASAP. If you can take a mortgage holiday for two or three months, this might help you to pay off the cc first - but as posted above, it would be more beneficial to see if you can save any money anywhere else first. If you can't, and you've cut everything to the bare minimum, then look to have a mortgage holiday.

3) Cut up both cards and stop spending on them, at least until you have some savings - or you are comfortable that you can afford to start spending again. Stick to debit cards, or your current account, and good luck. The next 6-12 months might be difficult, financially, but if you can tighten things and pay off at least the Barclaycard ASAP then that will be good news.

3a) As much as Egg money and other cashback credit cards are concerned, yes they're a good idea - but if someone is already racking up cc debts, I'd be tempted to suggest that they don't get any more credit cards... That's like offering a bottle of vodka to an alcoholic, and say no more than one shot a week...!

4) As an incentive, see if you can save some money in 6-12 months so that you can overpay your mortgage (if you can) by £50 a month. Or less if you can't manage £50. You'll be surprised how fast it'll save you interest on your mortgage. But don't do this until you've cleared at least your Barclaycard, and you are saving at least £200 so that you can pay off your other card.

Good luck - let us know how things progress...

HTH,
Richard

PS This is general advice from a member of the public, if you specify more details as the above post states, someone will be able to give you more specific advice.

whowants2brich

PS where I wrote "cheap amount" on your Barclaycard, that's the £1290 interest-free balance transfer. Barclaycard will allocate your payments towards this debt first, and when it's cleared, and only when, then you'll start paying off your purchases (which will be accruing interest all the time... This therefore defeats the purpose of having an interest-free BT. There are other posts on here about why people should not spend on a card AND have a BT at the same time - this is a prime example.

CannyJock

GOBBLEDYGOOCK wrote: »

Thanks for the replies guys. Made mistakes in the past with stuff like this so its great to get some advice. I thought about transferring the Barclaycard amount on to the Virgin card but I'll get charged 3% for the privilege.
I don't mean to be a noob but how will my minimum payment be £25?
I guess the best thing to do is to put the Barclaycard balance on to the Virgin card and go with it.

If you've got additional credit available on the Virgin card to do a 0% balance transfer (with the 2.98% fee) of the Barclaycard amount and save the £ 19.62 a month in interest, then that's definitely the route to go down.

There's a few posts around explaining the Virgin Money minimum repayment calculation - Yorkshire Boy has posted it a few dozen times with references to the exact part of the T&C's.

Martinslovechild

Gobbledygoock,

I've tried replying to your PM but I received the following message...

GOBBLEDYGOOCK has chosen not to receive private messages or may not be allowed to receive private messages. Therefore you may not send your message to him/her.

Check your settings and I'll happily resend my reply.

Thanks

GOBBLEDYGOOCK

I've just changed my settings, should be OK now.
Thanks