I have £300 to pay off towards a debt which should I pick?

[Marleya]

Very catalogue is currently £1083. Interest rate 39.9% APR minimum payment of 7% of balance or £5.

Capital one is currently £397. Interest rate 34.9% APR. Not sure on the minimum payments I normally pay between 15-20 a month

Next account is currently £215. 24.9% APR and I normally pay the monthly minimum payment between 10-15

I am leaning towards paying 300 off to very as their interest seems the highest and it is the one I am struggling to pay off the most

OR

I could pay my O2 contract off at just over £330 (no interest) and reduce my monthly phone bill from £55 to £7 by swapping to a sim only deal... not sure whether to do this and use the money that would have gone on my phone to pay off Very?

Ive been brought up with no financial help so this is all a big hole to me but I am determined this year to pay debts off. I have done really, really well at managing my money so may be able to pay a bit extra on all each month

Would it be a good idea to use my capital one card for petrol, food shopping, daily expenses etc then pay it off straight away to help my credit score?

Not while you’ve got existing debt on it.

Really well done for paying off Next, OP! One down, two to go…

I can afford £130 for repayments so I'm going to pay £100 to very, £30 to Capital one (though this may be more some months with birthday/christmas money)

As the interest rates on both are high, I’d be very tempted to try to smash the Capital One sooner - if it’s now at £297, if you pay £60 a month (& £70 to Very) you’ll have cleared it in 6 months at the same time your phone contract ends. Then you can properly attack the Very debt.

Some terrible advice on here re opening a 0% credit card and doing a balance transfer, also stalling payments! Ignore this advice, OP. It also assumes that you have a good enough credit rating to do this, and also risks the temptation to use it and fall into greater debt.

What I would do is:
Pay off Next. Pay the £85 balance towards Capital One debt and then a further £97 if you can really scrape it together while avoiding going into further debt.

After this, do NOT pay the minimum on the Very and Capital Ones debts! You will end up paying 1000s above the original amount.

Instead pay what you can reasonably afford - double the minimum? £5- 10 over minimum? OR a set percentage? Eg. On the £215 Capital One debt (this is after paying off the £85 + £97) pay 10% pm, so £21.50. And with the Very account you work out how much over you will have per month to pay towards it. This should be a set amount, even if a fiver of min payment, NOT the minimum payment.

There was a useful thread on this topic a few years back, with a spreadsheet. Will see if I can find it.

@Marleya

There's some sound advice and getting out of debt tools on this thread 👇

www.mumsnet.com/Talk/legal_money_matters/1987219-SPREADSHEETS-for-Debt-Control-Budgeting-Mortgages-etc

I wouldn’t open a new card right now, don’t put the credit search footprint on your file. I would however call capital one and ask if they have any balance transfer offers right now, sometimes they have very low interest for the life of the transferred balance or 0% for the transferred balance, just because the things you purchased on that card are higher doesn’t mean that’s the best they can do. My cards have new offers every few months for existing customers and you wouldn’t need to be credit checked again as long as you have enough available on your limit.

@Rainbowqueeen

If you think you can scrape together the 97 quid then do that and pay off the capital one. Then I’d work on the Next one because it’s the smallest. I’d aim to have it gone in 8 months. And I’d use that 8 months to learn as much as I could about finance and start looking at a long term plan. Make sure you close them both. I think once you are down to one you have more chance of getting a zero balance card if you can’t get one now. But definitely see if you can. Good luck

I agree about clearing the Capital One, because getting rid of one whole debt is a lovely feeling and will motivate you to carry on.

But I'd then throw money at Very because the interest is so high. If you've cleared Capital One, you'll be able to pay an extra £15 above the min repayment off, and clear the debt faster. Keep your repayments the same each month, though, don't just keep paying the minimum, which will fall as the amount outstanding reduces. You should be able to set up a regular payment for the monthly amount easily if you use online banking.

In 6 months, when you reduce the phone contract to £7, pay the £48 you save each month off Very too. That makes £63 per month, plus the £70 your already paying = £133 pm. Even allowing for interest, that Very debt will be clear in around 15-18 months.

However, this will only work if you stop using credit at Very, or anywhere else. If you add more spending to the existing debts, you'll just be undoing your good work.

Also recommend joining MSE, there's some brilliant advice on there. There's people who will help you reduce your fixed outgoings and help you save money on your regular shopping.

Good luck, OP. The day I managed to clear all my debts, apart from the mortgage, is over 15 years ago now and I can still remember how fantastic it felt.

@TerraNovaTwo

Some terrible advice on here re opening a 0% credit card and doing a balance transfer, also stalling payments! Ignore this advice, OP. It also assumes that you have a good enough credit rating to do this, and also risks the temptation to use it and fall into greater debt.

What I would do is:
Pay off Next. Pay the £85 balance towards Capital One debt and then a further £97 if you can really scrape it together while avoiding going into further debt.

After this, do NOT pay the minimum on the Very and Capital Ones debts! You will end up paying 1000s above the original amount.

Instead pay what you can reasonably afford - double the minimum? £5- 10 over minimum? OR a set percentage? Eg. On the £215 Capital One debt (this is after paying off the £85 + £97) pay 10% pm, so £21.50. And with the Very account you work out how much over you will have per month to pay towards it. This should be a set amount, even if a fiver of min payment, NOT the minimum payment.

There was a useful thread on this topic a few years back, with a spreadsheet. Will see if I can find it.

Do you really think paying 39.99% interest is a good idea, it will take so much longer to pay it off at that rate. Obviously if the OP is trying, and succeeding, at reducing her debt people would expect her to cut up the old cards.

The monthly interest on the £1083 will be £36 per month, £36 that could be coming off the debt if she gets a 0% card. If she could pay the interest payment every month for two and a half years and she wouldn't have reduced the debt by 1p.

I think 39.99% interest rate is horrific and shouldn't be allowed and getting that down should be the absolute priority.