What to do with my £500?

Hootie19 · 14 April 2008 at 12:02PM

I have a credit card with a £900 odd balance with Capital One, so high interest rate (don't know what it is off the top of my head, but it's bound to be in the high 20s).

I have a car which I have had for six months. It was the cheapest one we could find at the time that suited our needs (or so we thought). Turns out it is a petrol monster! £60 a week easily. And I don't really GO anywhere. It's mainly round and about, and maybe once a fortnight an 80 mile round trip to visit my daughter.

So what to do? I am just waiting for the cheque for £500 which my lovely ex-neighbour left me when she died recently.

Should I pay it off the Capital One card, which ordinarily, I'd say is the sensible thing to do. Or do I put it towards a new car, which will be smaller and far less thirsty. I paid £1,100 for my current car and I suppose it would be worth £750-£800 now? I dunno. So if I put the £500 together with whatever I get for it (either trade in or private sale), I should be able to pick up a car for around the £1,000 mark again.

Getting a different car would definitely decrease my outrageous petrol costs (have to use the car for driving to work as I need to come home at lunchtimes to see to the dog, otherwise I could either get a lift with my husband who practically drives past the door, or use the bus), but I am desperate to clear all our credit card debts asap (who isn't!) so that when our sub-prime fixed rate mortgage comes to an end in 18 months, depending on the financial climate at the time of course, we'd be in a better position to apply for a high street mortgage.

What should I do. Reduce petrol (and insurance/RLF costs at the same time) expenditure or pay a lump off the credit card.

I can't see the wood for the trees here!

Riq · 14 April 2008 at 12:04PM

I am really interested to know what car you bought which does such shocking millage.
Out of £40 of petrol I can get through maybe 320-340 miles out of my 1.4 Civic.

I would pay the credit card without a doubt.

weebit · 14 April 2008 at 12:13PM

i think the question you need to ask yourself if, what is costing you the most money?

A) what is the average amount of interest you are being charged on the credit card?

what is the difference between the running costs of your current car and the running costs of your new car?

if the figure for B is higher than A, then get the new car
if the figure for A is higher than B, then pay off your card

OR

pay the £500 into your card, get a 0% interest on purchases card and use the new card to buy a new car, then you wont pay interest on it for the promotional period, and then use this timne to pay off the other card!

Stinkybell · 14 April 2008 at 12:39PM

Pay off the credit card, and empty your boot of unncessary rubbish and keep your foot off the accelerator!

sugarpants_2 · 14 April 2008 at 1:12PM

What car did you buy? Sounds like a right petrol monster!!!!

racer256 · 14 April 2008 at 1:42PM

I would pay the credit card it will give you a huge sense of achievement and then will pay the credit card off quicker and allow you to save for a cheaper run car.

jak · 14 April 2008 at 2:52PM

I would try and sell the car. Buy a cheaper one then put the money on the CC. When it's paid off you can save for a new(er) car.x

TurnaroundSue · 14 April 2008 at 3:06PM

Isn't there a neighbour/friend who could pop in sometime during the day and let the dog out for a wee while? This way you could get rid of the car completely and use OH's car when you need to go and see your daughter!

Hootie19 · 14 April 2008 at 5:21PM

Thank you all

The car is an M reg 1.6 (could be 1.8) Mondeo automatic. To be fair, it is booked in for a service at the end of the month (pay day!) which may increase its fuel efficiency.

Stinkybell - you made me laugh out loud. I drive slower than a slow thing at a slow thing's reunion!! Half my friends won't let me drive when we go out because I stick religiously to every speed limit (came perilously close to losing my license due to speeding several years ago, and it scared me into being good!) and they say it takes twice as long to get anywhere with me driving. Maybe that's the problem - maybe the car is more economical when driven at higher speeds than I do! And the only thing I've got in the boot is a lightweight blanket so that the dog doesn't muddy the boot carpet, and a chuckit and tennis ball.

I am currently paying £40 a month off the credit card balance. I was thinking that if I could reduce by a large margin the amount of money I'm spending on petrol, plus the lower RFL, plus the lower insurance, then I could divert the money into paying more off the card. But I couldn't decide if that was a good move or not.

Turnaround Sue - unfortuantely no, there's no one around here who I could call on to let the dog out. And it's unlikely that the dog would let anyone in the house anyway without one of us being here!!

Weebit - unfortunately with a rubbish credit rating, 0% cards are out of the question at the moment.

Racer256 - see that's what I was thinking too. But then I thought, well if I pay off the card, I'm still running a ridiculously expensive car for the remainder of the balance of the card, plus it's depreciating all the time and therefore will be worth less when I come to sell it.

Ach - I just don't know!!