Which order to pay off Credit Cards?

Joolie75

Hiya all

I'm a newbie - once i was a dreadful spender, and now I want to be a saver. I earn £60k a year, and yet only have about £200 a month left after all my outgoings.
I've been very good this last few months - cancelled all needless things (saved about £100), and got new deals on subscription things. And next month I get my new car (which will save me £300 a month).
So, with this extra £400 I want to pay off all my credit cards.
Things is, I have 8 of them, with a total of £37,300 !!! I know !! I don't need telling !!
I'm realistic to have set myself a 4 year plan to get rid of these. But which is the best way ????
I've thought long and hard, and figure the best way is to pay the one with the least amount first. As quickly I will get more money to pay the next one off (e.g. paying £100 to 2 cards, becomes £200 to one card after the first is paid off).
However - am also open to better suggestions? Anyone recomend another method? Someone suggested the one with the higher interest first - but the amount I can afford makes that pointless for a while.
Thoughts ?

Thanks !

bethanyrayne

Joolie75 wrote: »

Hiya all

I'm a newbie - once i was a dreadful spender, and now I want to be a saver. I earn £60k a year, and yet only have about £200 a month left after all my outgoings.
I've been very good this last few months - cancelled all needless things (saved about £100), and got new deals on subscription things. And next month I get my new car (which will save me £300 a month).
So, with this extra £400 I want to pay off all my credit cards.
Things is, I have 8 of them, with a total of £37,300 !!! I know !! I don't need telling !!
I'm realistic to have set myself a 4 year plan to get rid of these. But which is the best way ????
I've thought long and hard, and figure the best way is to pay the one with the least amount first. As quickly I will get more money to pay the next one off (e.g. paying £100 to 2 cards, becomes £200 to one card after the first is paid off).
However - am also open to better suggestions? Anyone recomend another method? Someone suggested the one with the higher interest first - but the amount I can afford makes that pointless for a while.
Thoughts ?

Thanks !

Try applying for long 0% deals such as Virgin and Barclaycard 15 and 14 months respectively. Maybe you can transfer some over if not all. At least your efforts will the reduce the balance owed faster rather than paying interest.

CLAPTON

-shift debt to lower interest rates where possible.. i.e. to low LOB CC or 0% BTs

- then pay the minimum on each debt except the one with the highest APR ..on that pay as much as possible.. that way you will pay the least interest and clear the debt in the shortest time.

jamesd

It's not about clearing the balances fast, it's about cutting the interest bill fast, so the reduced interest payments leave you more money. That means reducing the balances of the ones with the highest interest rates first.

With the card balances it's believed to look better for your credit score to have all cards with around the same percentage of the limit owed than some maxed out and some cleared. So if you have trouble getting credit from companies you might target getting all of the cards to 90% of their maximum balance as the first step to increase the chance of you getting 0% balance transfer deals.

After you've tried 0% balance transfers and got whatever results you can, next stop would be life of balance low rate offers. With your card count it's likely that one or two would offer you one if you called and asked. Start with the lowest interest rate ones and look to balance transfer from the highest interest rate ones to the lower rate ones. For these deals it's simply about them deciding if they want to make the money from you instead of someone else... so as long as they think you can pay it's to their advantage to take your debt themselves. They aren't doing you a favor, you're offering them an opportunity to make some money out of you instead of someone else... so approach the call with that mindset.

If you don't get anywhere with balance transfer deals you might try the zopa listings. Don't ask for more than 5k at once there and expect to be offered between 8 and 15%, likely around 12-15% in your case. Then use that to pay as much as possible off the higher interest rate card(s). Once you've been repaying for 6 months on the first loan you can ask for another and people may trust you enough to go for it.

If a personal loan is available to you with a rate below that of some cards you might consider borrowing up to half of the total this way on a 3 year term and using it to pay off the highest rate cards first. This could quickly reduce your average interest rate and reduce the interest bill. The zopa loan can take you over half because it's flexible so you can pay off faster if you're able to.

So, first step: balance transfer deals too get your average interest rate down and free up more money to repay the debts.

Once you've tried all the available deals see if you have any cards with high interest rates that you don't need and consider paying off and closing one or two. Do close, don't just clear - the idea is to show them as satisfied debts and also reduce the card count. This is less important than reducing the interest rates, though, so don't do it at the expense of paying off a lot of money from the highest rate card(s). If a couple are very close to highest rate and one has a low balance you might consider closing that one even though it's a little inefficient.

If you give a list of cards, interest rates, limits and balances, plus any deals you currently have people here may be able to make some more suggestions, based on knowing which cards are more likely to do deals or which deals are around from other cards that might help.

The snowball calculator can help you to work out the best order to pay them off in and how long it'll take. Worth doing it once now before you start, saving the result and then seeing the change after you get the deals and loans you can get.

Joolie75

Thanks everyone.....might have to do some more checking before I start my paying-off plan !

Ta !