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Original poster

WWYD - Paying off credit card

17 replies

ASGIRC · 24/06/2023 23:12

I have an interest free CC, which has some debt on. Its not much at all, and Im doing the minimum monthly payments currently.

It will take roughly 18 months to clear. The interest free is a few months longer than that, so I wont be running out of that anytime soon.

My question is... Do I pay it off now, and get rid of that monthly outgoing? Or, since it is interest free, do I keep the minimum payments?

Currently I can afford both the monthly payments and to lump sum pay the balance. That might change in the near future, as my mortgage is due to increase in a few months, and I am also trying for a child.
Obviously I hope to be able to keep up with all payments, but maybe just not having that fixed bill coming off would be a good thing.

So, what would you do?

OP posts:

Singleandproud · 24/06/2023 23:15

Personally, I get rid of debts whenever I can so would pay it off. Perhaps you could keep half the lump sum aside and use half to pay off the loan and then increase your loan payments so it's paid off before your mortgage rises.

Albatross674 · 24/06/2023 23:17

If it’s interest free, I wouldn’t pay it off. But I’d save the lump sum for unexpected rises elsewhere.

Blueroses99 · 24/06/2023 23:21

I’ve always repaid the minimum and put a monthly amount in a savings account in order to pay it all off at the end of the interest free period. That way you are not having to find the full balance all at once but can use some of the savings interest to go towards paying the balance. It takes discipline though, and I can see the benefit of paying it off early to not have debt.

Original poster

ASGIRC · 25/06/2023 00:00

I have all my spare money in savings accounts with 3% interest, currently. So the lump sum money is there, earning interest.
I dont even have money on my current acct. It all goes into savings, and I take money out into the account whenever a bill is due or I have to make a payment (interest is paid daily)

And I wont be running out of interest free on this CC before I finish paying off this debt, so that isnt a concern.

It is more the having this outgoing for 18 more months when I can be done with it...

OP posts:

SarahDippity · 25/06/2023 00:02

I’d clear it off asap. A clean slate before trying for a child and anticipating interest rate and cost of living hikes.

Original poster

ASGIRC · 25/06/2023 00:09

SarahDippity · 25/06/2023 00:02

I’d clear it off asap. A clean slate before trying for a child and anticipating interest rate and cost of living hikes.

This is what I was thinking...

Now, if only I could clear my mortgage that quickly... 😂

OP posts:

MintyIguana · 25/06/2023 07:53

As it's interest free I would keep paying the minimum but each month move money to a savings account that is dedicated to paying it off at the end. Then you get the benefit of the savings interest. You can do better than 3% though. Look at MoneySavingExpert for latest savings accounts. You could split it between easy access and fixed.

However I would pay it off right now if you are potentially remortgaging and your credit rating might be looked at.

Singleandproud · 25/06/2023 07:55

The other option is to take it out of the general savings account and lock it away in something like First Directs regular saver which has an interest rate of 7% or a 12 month bond. It keeps it out the way so you aren't tempted to spend it on other things but works for you as well, then after the year just clear the CC debt.

MintyIguana · 25/06/2023 07:59

You can easily get at least 4% right now on easy access and nearly 6% for a 1 year fix.

DyslexiaNightmare · 25/06/2023 08:40

I'd pay off a chunk and either reduce monthly payments or bring the date which you'll have it paid off forward.

BarbaraofSeville · 25/06/2023 10:16

I'd let it roll along for as long as I could borrow for 0%, with no or low fee. I've been doing it for over 20 years and make hundreds of pounds a year in profit. Look up Stoozing.

But I also had a lifetime tracker mortgage so never had to impress a mortgage underwriter.

darkmodeon · 25/06/2023 10:22

Completely up to you and how disaplined you are. In theory you are better off doing what you're doing - getting the interest but if you feel better clearing it then do it

youveturnedupwelldone · 25/06/2023 11:14

I'd keep paying it like you are but be prepared to take the option of paying it in full if you find you need the extra monthly income eg when your mortgage goes up.

Original poster

ASGIRC · 25/06/2023 13:28

Having any saving on a fixed bond is 100% not an option. Need to have it available at all times, as these arent so much proper savings as they are money Ive not spent yet. Like I said, all my current account money is in savings.

Im pretty disciplined, but with mortgage going up and a potencial child, there might be expenses that are unforeseen and I might HAVE to use that money. And still have the monthly outgoing.

I do agree that, since it is on 0% interest, that it makes more sense to leave it and clear it monthly, as Ive been doing for the past few years, and keep the lump sum in savings, earning interest. But it is an extra outgoing, however small!

I dont do well with being in debt.

Usually, even with interest free CCs Id be paying any debt off within months.
But then I bought a house, which also needed a remodel (another load, tacked on to my mortgage), and THEN my mortgage went up by 56% last year, and it is due to go up again this year (will definitely try to get a better deal with my bank, or another, but it is unlikely that I wont suffer another increase, however small).

Im also trying to save to pay down my remodel loan (worse conditions than the mortgage, same length), and I guess I could use that money to do that, but really, it is only a few hundred quid...

Thank you everyone for your responses, even if they havent necessarily helped make a decision quite yet!!!

OP posts:

SilverOrchid · 25/06/2023 13:35

But if you pay it off now, you don’t have the money to take out of savings to pay one off expenses etc. That’s exactly the same as if you put it in a one year fix, but you’re earning interest on the fix.

The most sensible is to put the money into a fixed 1yr to 18 month account, but sometimes it’s better to forego the interest for the psychological benefit of having it paid off, but there is a cost to that benefit.

Ilovetea42 · 25/06/2023 13:37

I'd pay it off now. I did the opposite because of the interest free period and then ended up with unexpected bills for a while and it became way harder to pay off especially when the interest free period ran out.

Hitchens · 01/07/2023 12:13

ASGIRC · 25/06/2023 00:09

This is what I was thinking...

Now, if only I could clear my mortgage that quickly... 😂

Show quote history

it doesn't make mathematical sense to pay off a debt costing you 0% in interest with savings that are generating you interest though? Although you say the balance isn't much at all? so equally the interest on the equivalent won't be much either. If its £1k then you are talking £30 a year in interest, hardly going to make much difference to your life either way.

If it makes you feel better clearing it now then do that. If it makes you feel better having the money in savings knowing you can pay it off at any time and earning some interest then do that.

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