Which debt to clear

[bellalou1234]

Iam useless with money and have ran up various debts. I'm working as many over time shifts as I can to pay my debt off. Unfortunately I'm now paying interest on credit cards that were interest free. I've got bad credit due to the amount I owe, I've never missed payment ect.. so hoping after 6 months I might be in a better position.
My question is I'm going to pay 3000 of my credit card debt, which would be best
Mbma 7300 paying interest
Or mbma 2390 clear it and pay remainder of larger debt where the interest in like £95 per month?

Always pay the card with the highest interest off first.

Depends on the interest rates really. Do you know what they are?

Can you move both onto a 0% card?

What are the interest rates for each card? Are you paying interest on both?

If you pay money off the one which has the highest interest rate, then you will save money compared to paying lower interest card 🙂

Paying interest on both. Unable to get a o% as my credit utilisation is too high. Hopefully once I start paying chunks off it will help. I'm an idiot

If you have a few different debts with different interest rates there are some great apps where you put in all your info and they work out the best way to go about it.

Generally, clear the debt with the highest interest rate first. However, some people stick to repayment better if they clear small debts so psychologically it can be better for some to not follow that rule.
You can use a “snowball” calculator to make the best financial decisions.

www.stoozing.com/snowball-calculator.php

But the very best thing you can do is find the Debt Free Wannabe board on MSE, and ger advice and support there. Good luck!

@bellalou1234

Paying interest on both. Unable to get a o% as my credit utilisation is too high. Hopefully once I start paying chunks off it will help. I'm an idiot

Do you know what the interest rate on each is though?

Both at same interest rate 21.9%

If both the same interest rate, I'd clear one card, and cancel the account. The put everything currently going on debt onto the remaining card.

If the interest rate is the same on both cards consider whether either are likely to offer a decent balance transfer offer when you have some available credit. As that could help cut your costs, MBNA often have offers in my experience.

The other thing to consider is whether psychologically or practically you would be better with one big debt or two smaller ones.

There is also your credit rating. That is likely to be better if you clear some from both debts as it likes your overall utilisation to be below 50% and doesn't like to see credit cards close to their limit.

Get professional advice either from someone like citizens advice or from your bank. Your bank might talk about consolidating your debt into something lower interest - i did this once with an overdraft that got out of hand. Citizens advice will help you to priorities debt and help you work within a budget.

*prioritise

I think I'll pay 3000 of the larger debt then keep chipping away at both. Luckily I work for nhs and they've increased the overtime rate until March due to the chronic staffing. So will try and do extra just to pay the debts.

First of all well done for addressing this OP! Its a small step and dont lose sight of your goal. Secondly, I’d ring the credit card companies about your options - dont be too apologetic, and be firm that you are paying this off and need it to be 0% interest for 6 months to a year.

Will they extend my 0% interest free period? I suppose its worth a go?

@bellalou1234

I think I'll pay 3000 of the larger debt then keep chipping away at both. Luckily I work for nhs and they've increased the overtime rate until March due to the chronic staffing. So will try and do extra just to pay the debts.

It won’t make any £difference but you may find that reducing the larger debt as you’ve suggested will help you feel more motivated because both your debts will be smaller numbers - sometimes when an amount seems more manageable, it’s easier to be motivated to decrease it 👍🏻

Cocomarine I agree specially when it goes from in 4000 to the 3000s. Cards have been cut up. I will never be so daft again.

@bellalou1234

Cocomarine I agree specially when it goes from in 4000 to the 3000s. Cards have been cut up. I will never be so daft again.

You know, I’d actually do £395 to the lower balance card, £2605 to the other. £2300 to £1995 £7300 to £4695 That gives you an under £2K and under £5K - both very motivating reductions!

@Cocomarine

Generally, clear the debt with the highest interest rate first. However, some people stick to repayment better if they clear small debts so psychologically it can be better for some to not follow that rule. You can use a “snowball” calculator to make the best financial decisions.

www.stoozing.com/snowball-calculator.php

But the very best thing you can do is find the Debt Free Wannabe board on MSE, and ger advice and support there. Good luck!

That snowball calculator is excellent. Thanks for sharing!

Hey @bellalou1234 firstly, congratulations for recognising this and making it a priority to get them both paid off.

In your circumstances, I would pay off the one card completely and put the remainder of the money on the big one. My reasons are:

• it will feel psychologically like a big ‘win’ and encourage you for the next step.
• you now just have one payment due date, one interest charge, one interest rate, one debt owing, instead of two. It is again psychologically simpler.
• you don’t want to ‘feel better’ by kidding yourself that you have two debts in the 3000s - you want to scare yourself that you have one debt of £6600 with a 21.9% interest rate (approx £120/m in interest alone at this level) and you need to use every bit of the NHS overtime to clear it! If you got another 0% period/card or relaxed abit, you’ll relax your efforts and be in this mess for longer.

Seriously - pay the little one, put the big one on your fridge and stare it down. If you can make (or save elsewhere) and extra £1200/m for 6 months, this is over.

You can do it!

Spingdaisies that's a plan too. Then I could try send snowball the other one. I'm sure my credit rating should improve once the actual amount of debt decreases.

I've gave myself an allowance of £150 per month to live off, petrol food ect. My petrol is my biggest outgoing but a necessity. I've stopped all take aways. We used to be ridiculous. Using up food and making an evening to use for lunch.

Thank you for the snowballing link and I'm going to look at mse for anymore tips....

Per week. Anything left straight into my saving sccount to pay off my debt

If the interest rate is the same, it makes no difference to the cost, and it will be neater and a psychological win to completely pay one off, so do that. Then send a bit to your other card to reduce the debt on that too.

Is this your only debt? No overdrafts? The interest rate on those is even higher so stay out of over draft. You could pay for your petrol on the card that is emptied and then pay it off in full every month, as this will help with cashflow and boost your credit history.

For the remaining card, always pay as much as you can, and definitely more than the minimum.

If you've never missed a payment and are 'only' in around £7000 of debt, while working full time, you might be able to get another card, so it's worth applying.

You might also be able to get a lower rate personal loan to pay off some or all of the card, so try that. Maybe avoid Sainsburys, as I've found them to be less accommodating, but perhaps look at loans from your own bank?

Also have a look at the Moneysaving Expert budgeting section and get the weekly email for ongoing tips on getting extra money and saving by reducing costs especially credit card balance transfers and reducing bills.

If both same rate of interest. Pay of lower card, then cut it up and cancel account. Then pay rest off of higher account and don't put anything else on it. Just keep paying it down going forward. After 6 months try to get a 0 percent card and transfer remaining debt across.