Moral Dilemma

LavenderBlue · 17 July 2017 at 11:36AM

Hi All,

I have got myself into some credit card debt, it's £2800 but it's at 0% until January next year. I'm paying it back at £65 a month.

I am on a decent wage bringing in £2200 a month with minimal expenses (husband pays the bills) but due to a recent employee tribunal and crippling childcare costs of £900 a month (which will last until my youngest leaves nursery in 2 years), I am £1700 in my (authorised) overdraft.

I want to get this debt paid off and I can afford to pay £500 a month. So do I..

1. Wait for my wage to go in which will take me (temporarily) £500 in the black, but then when childcare comes out, I'll be -£400, then the cc takes me to -£460 - then try and spend as little as possible, creeping out of debt that way but only taking the min off my cc

2. Take out a loan to clear the lot at 3.6% APR for £5,000 then pay that off at £500 a month over 10 months (I'd still be in debt but the APR on the loan is less that of my overdraft, and I could cut the cc up)

3. I have a savings account with £6000 in it but it's money I've saved for my 2 young children (both under 6). Do I borrow that, pay the debts off and then repay it over 10 months (I'd never ever be reckless and spend it on anything else). My plan is in 2 years to pay in £500 a month anyway when the childcare costs end, so I'd just be doing it a bit sooner. I feel awful thinking of this but they want for nothing, they don't know they have the money and it seems ridiculous taking a loan when I have this savings account, though the money isn't morally mine.

What should I do

Jenjenjen17 · 17 July 2017 at 11:46AM

Hi Lavender

This seems like a no brainer to me, get any interest accruing debt payed off with your savings otherwise you are paying unnecessary interest and will cost you more in the long run.

ReadingTim · 17 July 2017 at 11:50AM

You have 6 months of 0% on the CC and can afford to pay £500 per month. 6 x £500 = £3,000, which is slightly more than the CC debt. Therefore, you'll have cleared the debt before it costs you any money - seems like a no-brainer to me.

You can then put that £500 per month into getting out of the overdraft - but this time next year you'll be out of the red completely, without taking on any more debts, or "borrowing" from the children. What's not to like?

Tammykitty · 17 July 2017 at 11:54AM

Is the overdraft interest free?

If the overdraft is interest free then as follows

£1700 overdraft debt - at £500 a month, this will be gone in Sept (or Oct)

£500 a month then goes towards the credit card - so Oct, Nov, Dec, Jan - that's £200 of it gone before the end of the interest free period

That only leaves £800 - so pay this out of your savings before the end of the interest free period

StopIt · 17 July 2017 at 11:59AM

I think people have missed the bit about your overdraft having an APR, meaning it's not interest free.

So, a hybrid solution.

1: Use your savings to clear the Overdraft, saving any interest.

2: Pay the £500p/m into the CC and clear it before the 0% expires.

3: Then continue saving for the children.

You say that childcare is "crippling", yet if you bring in £2,200 yourself and have little other expenses to worry about, where's the money going? There's £1,300 p/m unaccounted for here.

kazwookie · 17 July 2017 at 12:11PM

Move the child to a cheaper nursery?

Use a child minder instead?

Where is the rest of the money going?

zippygeorgeandben · 17 July 2017 at 4:41PM

and don't put anything else on the CC!

enthusiasticsaver · 17 July 2017 at 8:06PM

Use the savings to pay the overdraft off and repay it over the 10 months or whatever. No brainer. After all the money was used for childcare so not totally unrelated to your children.

Number75 · 17 July 2017 at 9:39PM

There's no moral dilemma here.
Would be, if the £6K was grandparent birthday gifts, or similar.
This is your money that you've saved for the kids but now can't afford. No more a moral dilemma than if you were saving for a car then needed a boiler instead.

Clear the debt with YOUR savings.

But do work out why on £2200 with minimal outgoings except the £900 nursery, you can do this without touching the savings.

If you've £1300 to spare every month, you should cut back and have that overdraft paid off in two months.

EssexHebridean · 18 July 2017 at 11:15AM

As above have said, but also: cut up the credit card, and reduce the overdraft down as you clear it off. If your budget works and you have the amount of cash each month that you think you do, then all you need in the way of an OD is a "buffer" to avoid unauthorised charges if a credit goes in a bit later than expected or a debt comes out a bit earlier.

I guess the question is - DO you have the amount of spare cash each month that you think you do?

Moral Dilemma

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free