My credit card mess- what route to take?

[Ginandbearitall]

Hi,

i’m in a mess with 2 credit cards. Both have high balances due to a period of unemployment plus a tax bill from a few years ago (when I wasn’t in a good place).

due to a few missed payments (not recently) I’m not able to get a 0% balance transfer or a loan that isn’t a ridiculous rate. I’ve tried everything believe me!!

card 1- MBNA balance is 10500 and interest 33% 😩 I’m paying £370 a month minimum

card 2- Barclaycard balance is £9000 and interest is 25.2%. I pay £278 minimum

so I’m paying £658 a month on both cards and over half is just servicing interest!

I’m working full time now and earning well so I am in a position where I can overpay quite a chunk to clear it all in 1 year 10 months- according to the snowball calculator.

other option is that I go into a debt management plan so that the interest is frozen immediately. Not sure if this would be allowed as I have the means to pay.Ruiz would also destroy my credit file for 6 years so no hope of a new mortgage etc

what would you do in my circumstances ?

Overpay and pay it off, be madness to go into a debt management plan if you can pay that off in little more than a year and a half, and your job is stable and secure.

without knowing what your income is and what other expenses you have, it's hard to advise.

If you could increase the amount your are paying, this would obviously decrease the debt quicker. If you could pay weekly rather than monthly this would also reduce the debt quicker - could you get a second income?

I would imagine if you could transfer to a zero interest card then you'd have already done so ?

I'd say this is a no brainer. Cut spending back to the minimum and clear the lot asap, starting with MBNA.

Snowball is exactly the right name for the calculator: once you get going your progress will accelerate more and more.

It's vital to start asap before you get used to your new salary. Unless something's really beneficial, like replacing a broken washing machine, or smart clothes for work, or an occasional lime soda down the pub for networking, try to spend like you're still unemployed

Be frugal for that year and a bit. Overpay on both cards, with the emphasis on that MBNA card because of the crazy interest rate.

That time will zip by, and you will feel so much happier when they are paid. As an added bonus, you'll have got into frugal habits and have a huge amount of saveable money left over each month.

Good luck 🍀

Also, paying as much as you can off your credit card debt isn't "overpaying", although the credit card companies might like you to think so. Your goal is to get to a place where you pay off your credit card in full every month, so you should switch your mindset to see that as normal.

As you pay them off every month, your credit rating will increase and you may find you are offered better interest rates and 0% transfers. download the money supermarket app, it has free credit scoring and offers of new credit available to you, As well as insurance deals etc.

If you can clear it in a year do that obviously.

Talk to stepchange though - those interests rates are shocking and you may be able to get it frozen to clear without too much of a dent to your credit file.

Every £1 you pay off each month is worth multiples of that when you consider its interest. I’d be eating beans on toast and sitting in blankets this winter! invent a long virus to avoid having to attend Christmas and exchange gifts, load up on charity shop books and spend a few months hermitting it up and putting everything bar your mortgage and basics into those card balances. The long term savings are huge. Once you’ve cleared about a third of that, I expect you’ll get offers for balance transfers or low cost loans again to better manage the rest, but I speak from experience that spending a few months reading under a quilt and spending nothing will see you with a massive head start. It’s also quite enjoyable once you get into it.

Charity shop books! Luxury! Libraries and free book swap shelves are the way to go. (As long as you don't need to spend petrol or a bus fare to get to the library obvs)

Definitely overpay. Live like a monk for a year. Prioritise the one with the higher interest rate.

@WhenLifeGivesYouLimes quite! Love your attitude! Free books even better of course! In my case the charity shop was walking distance and the books were pennies, plus the old ladies and their chatter brightened my day a bit. So in my case it was well worth it. But the general advice stands that a few months of hermit and blanket behaviour is definitely a good shout.

Check Dave Ramsey's advice on paying off debt. This includes setting up an emergency fund (say £1k). This covers unforeseen events like washing machine or car repairs so you don't end up using a CC for those.

I wouldn't do the debt management as it will hugely affect credit. Overpay as quick as possible.

Definitely pay it off without a DMP.

You've said you can't eat 0%, but can you get any credit that's cheaper than the MBNA one? That at least will save you money.

Money saving expert always has cards for those with poor ratings, I'm sure you can get some of it moved onto a cheaper rate.

Just pay it off if you now can, not an ideal amount but definitely not unusual. Could also consolidate into a loan from your bank, might be better APR. Don’t see any good reason to apply for special treatment if your earning a decent salary

This interest rates should be illegal.

This. I would like to see legislation that says max interest rates are 10% or so above the base rate. I have a Tesco credit card, I pay it off every month but the rate is a reasonable 10.9%

Minimum payment on Barclaycard and all extra cash used to pay off the higher interest rate MBNA card. Once the MBNA card is cleared everything used to pay off the Barclaycard. As mentioned on another thread do a colouring chart to show your progress. Also, once the MBNA card is paid off start to plan how quickly you can grow your savings once the Barclaycard is paid off e.g. if it takes 1 yr 10m then in 3 years time you could have £8400 (14 x £600) in savings.

Try to find ways of finding extra cash. There is the £10 a day threads on the Money Matters threads which have some good ideas.

Is there any reason not to contact step change?

https://www.stepchange.org/

Sadly keep chipping away at it is all you can do.

Live as basically as you can, maybe see if you can temporarily increase your income, sell things, babysitting, temporary Christmas work etc to throw everything at the debt.

Maybe try a couple of balance transfer applications every 6 months to see if you can be accepted for an offer that will lower the interest.

Then when you're out of debt, you should have plenty of spare money to save for ups and downs in expenses so you'll be able to cover them without borrowing and that's a great place to be in and will come round really quickly. You'll be nearly there by the end of next year.