If you were in £10,000 worth of credit card debt and someone left you £1000

[OnePramAndHisSprog]

Would you use it all to pay off a bit of the debt?
There are so many bits and pieces that we need and we are unlikely to ever get a sum like this again... But it seems like such a joyless way to use the money. And only a drop in the ocean of what we owe.
On the other hand, we are never going to get out of debt unless we prioritise that above everything else. WWYD?

[TeacupDrama]

actually you should not build up rainy day fund before paying off credit card debt and yes it is still best to pay off credit card by £1000 even if needed £300 in 4 months time as that would be 4 months with no interest on £1000 and still no interest on the £700 she has then actually paid off

if she really needs to spend £50-100 on new coats boots that is still £900-950 off the debt it is silly to say because you need to spend £100 of it you may as well spend other £900 too

she should pay £1000 of the £3000 that has interest accruing which is now £2000 so already cut interest on that debt by 1/3 from now on she should pay minimum each month on £7000 on 0% and the max she can afford on the £2000, hopefully by July she will then have cleared 2000 ie £250 a month then she should be able to transfer at least part if not all the £7000 to new 0% deal and then start reducing that debt, if she can get all £7000 on new 0% deal maybe a good idea to start small rainy day fund

[DeathByLaundry]

Teacup I see what you're saying but I have tried living within that method for 5 years and it hasn't worked for me. A lot depends on the interest rates on the cards - if the OP shops around and manages to keep them low or 0% (and MSE has a section on card deals for people with less than perfect credit scores), then I would really say that a cash rainy day fund is better. You cannot buy a second hand washing machine on a credit card. You cannot pay the local cheap garage with a card. You cannot buy bundles of second hand children's clothes with a card. Having cash saves you being forced to buy big new items. This stung me time and time again (most recently was having to spend £120 more on new tyres than it would have been locally but local garage doesn't accept cards and I didn't have the cash).

[AngelsWithSilverWings]

I'd use it all to pay off debt. We recently came into £10k and used the entire sum to reduce our mortgage. Our mortgage is our only debt and I can't wait to get it completely paid off. I hate owing money.

[samandi]

thanks mrsjay - i had no idea. that's quite shocking, how are they supposed to pay them off during their course/afterwards if they end up unemployed?

[IfNotNowThenWhen]

OK, not read full thread, but I do not what I am talking about here-loads of debts, credit card and otherwise, been there done that etc.

Here is what you can do:
You get the interest stopped asap.You can do this by calling individual cc companies, all of whom have departments used to dealing with this. You don't have to default, you can negotiate to stop your card and have the interest stopped.
Barclaycard did this for me-I was really struggling, so they reduced the amount I had to pay each month and stopped the interest.
Personally I had other debts too, which were snowballing, so I went to stepchange.org, who put me on a debt managment plan, which means they negotiate a small payment to each creditor, and I pay them an agreed amount monthly. There is no charge for this.
This means that my credit is fucked for 6 years, although If I get a lump sum before then,stepchange will negotiate for my debts to be cleared, and my credit report will reflect that.
I think there is a case to be made for being creative, remembering that everything, even your debt is negotiable.
Incidentally, this is an interesting link about debt

[MILLYMOLLYMANDYMAX]

£50-£100 on a coat. Try EBay. Got my "new" coat last year for £6.29, it will last me several years, it had only been worn once.

[IfNotNowThenWhen]

OK, read some of the thread now. Must reiterate There is no point putting this cash towards the credit card debts if interest is still accruing
Getting the interest stopped is absolutely paramount.
And do read the article I linked to. Debts are bought and sold and negotiated all the time, and can be paid off for way way less than you may realise. A friend of mine is a debt counseller at the CAB, and she recently got one debt company to accept about 20% of what the debt was on paper to write it off. This is because the debt company probably bought the debt for 5% of the "worth", so they still make a profit.
Of course I am not suggesting you default etc if you really can service this debt, but as I said, you CAN negotiate with companies without defaulting.

[AbsduCroissant]

I think Trills illustrates it quite well.

One thing to take into account when moving to 0% cards is to calculate the charges, and whether or not (e.g. if you have a balance that could be paid off in a month or two) it is worth it. Typically they charge around 3% of the total balance to move it, so although from there on in it's 0%, there is an initial cost.

[IAlwaysThought]

Don't forget the effect that applying for other loans, etc may have on your credit rating. Read up about credit ratings on money saving expert.

[LovesBeingHereAgain]

Would advise putting £200 away for an emergency (if you can't trust yourself then give it to parents to look after, then pay £800 off tge highest interest debt

[Spiritedwolf]

We are now debt free. A financial advisor at the Citizen's Advice Bureau helped us to arrange affordable monthly payments at no cost to us. I think it took about 5 years, which seemed ages at the time but its done with now. We know we paid it off in full and hopefully we can build up a positive credit history for the future.

I know the temptation to spend some of it, and the guilt. The very virtuous posters who know the best thing is to save it are giving the correct advice, but I know how crap it is living frugally for an extended period of time and feeling like it will never end so don't judge you for wanting to spend some of the unexpected money on essentials. It is awful but putting as much of it as possible on the debt means it will be over sooner.

Its amazing though being debt free. DH just got offered a PPI refund from our old bank, and our discussions about how much to spend (small amount) and save (most of it) are guilt free. Of course, if there hadn't had PPI on the original loans we would have been debt free about a year or more earlier...

We didn't run up huge credit card debts on frivolities. We maybe haven't always been as savy as we are now, but our income had dropped and we couldn't afford to live where we had been and it took a while to arrange an alternative.

[Spiritedwolf]

Don't pay for debt management. Speak to CAB or another free service.

[dontleavemethisway]

I am debt free after getting help with Stepchange - one of the free debt advice charities. I found them easier to get hold of than CAB, there was a long waiting list for our local CAB branch, but Stepchange offer help over the phone. I had 70k of debt but no assets so they recommended bankruptcy to me. Far cheaper than a debt management plan, as I would have needed to make repayments for years on a DMP, but with BR I didn't have to make any repayments at all, just pay the £525 fee.

[ferretyfeet]

I am a card tart,I move my credit card debts to interest free cards. I have just moved my last £1975 to an new card. I should pay it off in the next 5 months,4 if I'm lucky. However one thing you must NEVER do is use the new card for purchases. I have had a few of these cards over the years but have never been tempted to use them,I have just transferred what I wanted and when it was paid of I closed the account.My latest card I did it on line I was accepted immediately,my £1975 was transferred and they gave me a credit limit of £11,500, I simply could not believe it, fortunately I am able to resist the temptation to spend,but I think it's ridiculous to offer people these stupid amounts.'With regard to your windfall I would pay it off your debt.

[Viviennemary]

Why not spend say £100 and have a treat. And use the rest of it to pay of the debt. I think that's what I'd do in your circumstances.

[imofftolisdoonvarna]

The very fact that you are asking the question explains why you are in 10 grands word of credit card debt.

Pay it off!

[imofftolisdoonvarna]

Worth

[elskovs]

OMG yes definitely! I would buy NOTHING but essentials until the debt was paid off.

I don't understand why you would consider anything else. But entirely your choice of course.

Congratulations on the windfall :)

[liquidstate]

I had £5k debt at the start of the year - hangover from having to do unpaid internship work after uni. I received a lump sump of £1k over the summer and used it to pay off the debt accruing the worst interest - in this case it was my student overdraft as Natwest were increasing the fees. I use the surplus from my wages to pay off the credit card with the most interest or least 0% period left to run. Once the 0% runs out I transfer the debt to another 0%. This is basically what the money saving expert site says to do - they call it stacking I think?

I still have about £2k debt but getting there. I do not use my credit cards to buy things except for one which gets paid off immediately (I have to use for work expenses).

Definitely use it to reduce your debt. It will feel like you haven't done much but it does make a difference in the long term.

[IAlwaysThought]

I would highly recommend listening to BBC radio Live 5s Consumer Team with Martin Lewis . You can download it on the BBC Radio IPlayer. All the shows are of interest but there is one dated 24/10/13 that looks at credit card debt. It's very interesting.

[CurlyhairedAssassin]

"It seems like such a joyless way to spend the money."

OP, read back what you have written. Being in so much debt is pretty joyless in itself, don't you think? That £1000 is simply not yours to spend anyway. It is already owed to someone else and you need to stop thinking of it as available funds that are yours. The money is ALREADY accounted for. It is obvious - put it towards paying off the debt.

Stop thinking in terms of spending money as bringing you joy and you may just one day clear your debt. But until you change that mindset I doubt it will happen.

[Spiritedwolf]

It is very difficult to live with 'nothing but essentials' (especially if you aren't including warm winter clothing as essential!) for years and years. It's very stressful and demoralising. Of course people do it if they have to, and its better than running up more debt, but a sensible debt payment plan makes a reasonable allowance for some discretionary spending (hair cuts, christmas presents etc), nothing lavish but enough to allow a reasonable standard of living.

[elskovs]

Haircuts ?? LOL

If I owed 10k Id cut my hair myself! Seriously, I don't know how anyone can justify going to the hairdressers when they are in so much debt.

Or buying present actually. Id cancel Christmas myself.

[DeathByLaundry]

elskovs I think that was an unsympathetic, sanctimonious and naive post. Every bloody day brings something new and challenging when you're bare bones broke. Today DS was told by his swimming teacher he needed to bring new goggles next week because he can't go under properly with his current leaky ones. I can't afford goggles until pay day. I had to tell him that, and he's resigned but disappointed because the rest of the class are having fun collecting sinkers. It's shitty to have to refuse your DC things all the time. It's very easy to wax lyrical about what you'd sacrifice but you're not in those shoes.

And I do cut my own hair FWIW.

[CurlyhairedAssassin]

Erm, I think that was the point that elskovs was trying to make? That you go without.