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Savings vs. credit card

Former MemberFormer Member Posts: 1,876,328 The Mix Honorary Guru
Ok, so I have about 2 grand in savings at the moment, but my credit card is also at about 2 grand and I'm getting hit with interest rates at about 30 quid a month. So, even though I'm paying about 100 pounds a month to it, only 70 pounds is actually paying it off. What can I do?

In addition, my overdraft is only at -400 pounds, so I'm unsure as to what the best course of action is.

It's really weird, but I actually like the look of 2000+ savings and my low overdraft, but the credit card thing is killing me...

Comments

  • Former MemberFormer Member Posts: 1,876,328 The Mix Honorary Guru
    pay off the credit card straight away - look at it this way - theres no way you're earning 30 quid interest on the 2 grand savings so you're losing money overall.

    then pay off your overdraft and start dumping into savings again
  • **helen****helen** Mod malarkist Posts: 9,235 Boards Champion
    ShyBoy wrote: »
    pay off the credit card straight away - look at it this way - theres no way you're earning 30 quid interest on the 2 grand savings so you're losing money overall.

    then pay off your overdraft and start dumping into savings again

    :yes: eta - unless you can transfer your credit card debt to a 0% interest account.
  • Former MemberFormer Member Posts: 1,876,328 The Mix Honorary Guru
    There is no point at all in having savings while paying off debt. One negates the other.

    I go to money saving expert for all my financial needs!
  • **helen****helen** Mod malarkist Posts: 9,235 Boards Champion
    It's the same with me really and my argos card, the intrest is huge,. But i just don't know how to go about opening another bank account and paying it off somehow so i get lower intrest.

    Anyone know?

    We could do with a financial guru on this board toh elp because it's obvious everyone is feelign the strain of the modern economy.

    GWST and Kermit are both financial gurus tbh - get reading previous threads and you'll find loads of stuff!
  • Former MemberFormer Member Posts: 1,876,328 The Mix Honorary Guru
    It's the same with me really and my argos card, the intrest is huge,. But i just don't know how to go about opening another bank account and paying it off somehow so i get lower intrest.

    Anyone know?

    We could do with a financial guru on this board toh elp because it's obvious everyone is feelign the strain of the modern economy.

    What you want to do is look for a credit card with 0% on balance transfers and no interest to pay for as long as possible - 6 to 12 months is typical but lenders are getting tighter on credit. Transfer the debt on your argos card to the new card, chop up your argos card, and pay the debt off on your new card. This way you won't incur any extra interest payments at all.

    If after the period is over, you can transfer it again. A lot of people manage their debt in this way, ensuring they always keep interest payments as low as possible.

    Looking at www.moneysavingexpert.com - there's an article specifically about this:
    http://www.moneysavingexpert.com/cards/balance-transfer-credit-cards
    Top Overall. Barclaycard 0% for 14 months with a 2.5% fee.

    Barclaycard Platinum* offers new customers 0% for 14 months, with a fee of 2.5% of the balance switched. If you're an existing Barclaycard customer, you may not be able to get this one too, so take a look at the alternatives.

    So for example:

    So paying that off over a year world work out at:
    £170.83 a month for 12 months whic is £2,050

    Paying off an argos card with the balance over 12 months:
    (according to this calculator: http://www.whatsthecost.com/creditCard.aspx)

    Would take 163 months at the minimum repayment rate (over 16 years) where you will pay back £4,425.53 in total
    or if you overpaid on the balance for example by £90 each month (about the same rate as above) it would take 19 months and cost £2,366.15

    Though note the figures aren't 100% accurate, it gives a fair indication of the differences. Use the calculator and the article to check it out :)
  • Former MemberFormer Member Posts: 1,876,328 The Mix Honorary Guru
    I just applied for the Barclaycard 14 month 0% card and I'm going to pay off 1000 pounds on it and then the rest over a year. It's nice to have savings, even if it's not 'real' savings :(
  • Former MemberFormer Member Posts: 1,876,328 The Mix Honorary Guru
    If you get the 0% deal pay the minimum payment for six months and pay the extra into the high-interest saving account. Only clear the credit card balance right at the end of the interest-free period, that way the interest goes into your pocket not theirs.

    If you don't get the 0% deal then use your savings to clear your debts. There's no point having savings for a "rainy day" when you only need the money because of your debt. You will be much more secure financially by not owing money to anyone else, should something terrible happen to you.
    **helen** wrote: »
    GWST and Kermit are both financial gurus tbh - get reading previous threads and you'll find loads of stuff!

    :blush:

    I wouldn't go that far.

    Matt, take at look at moneysavingexpert.com. There's a brilliant article about the "credit card shuffle", where you transfer debt at a high rate onto interest onto cards that have a lower rate of interest. Martin Lewis is a big camp God.
  • Former MemberFormer Member Posts: 1,876,328 The Mix Honorary Guru
    Kermit wrote: »
    If you get the 0% deal pay the minimum payment for six months and pay the extra into the high-interest saving account. Only clear the credit card balance right at the end of the interest-free period, that way the interest goes into your pocket not theirs.
    So, say I was paying 100 a month to my credit card at the moment (which is not 0%). I then get a new cc with 0%, instead of paying 100 a month I should just pay the minimum amount (say 50 quid), and put the other 50 quid in my savings account? And I should just leave the 2 grand I've got in my savings until the 0% cc runs out and use whatever I've got saved up to pay it all off?
  • Former MemberFormer Member Posts: 1,876,328 The Mix Honorary Guru
    Pretty much.

    Assume that your balance is £600 and the 0% deal will last for six months. You can pay £100 per month onto the card and at the end of the deal your balance will be cleared. You won't be charged any interest on the money you owe until the end of the deal.

    Assume that your minimum payment is only £50, though. If you pay £50 into the credit card and £50 into a savings account, you're earning interest on the £50 you've paid into the savings account. If you put the full £100 onto the card each month, you're not earning interest.

    At the end of the six months you transfer all those saved £50s onto the credit card. You've still repaid £600 in six month and you still won't have paid any interest on the money you owe. But what you have earned is a bit of interest- not a lot, but on £300 you're probably looking at about £15-£20. Better in your pocket than theirs.

    The longer the deal and the higher the balance, the more money you could save.

    Some people do this all the time. They borrow money on a 0% deal and put it into a high-interest account for the length of the deal. At the end of the deal they pay the balance off and pocket the interest. This is called "stoozing" and there's a good guide to it on moneysavingexpert.com.

    You might want to look up the "credit card shuffle", too, if you have more than one credit debt.
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