Micro payments towards debt - do they make a difference?

[AutumnLeavesandKnittedJumpers]

I had a bit of a mental breakdown this year and wracked up a lot of credit card debt. I’m working on paying it down and it’s all interest free, so I’m not looking for advice on that.

I’m doing “micro tasks” to boost my income and making about £10-£15 a day. But if I’m doing that, is making a payment of £10 a day actually going to do much? Or am I better off saving it all for a big monthly payment?

If it's interest free it makes not difference if you pay daily or monthly. The best bet is probably to work out which would motivate you more and make you feel happier? Chipping away at it daily or big, less regular wins?

I really don’t know. I can see that paying off a chunk (like £300) would feel great, but I can also see that I would be tempted to spend if I let it sit in my bank account for ages.

Can you put it in a separate account and earn a bit of interest? You'd have a buffer for any tax owed too.

I’ve planned for tax and I’m tracking to make sure it’s all set aside, I just think the temptation might be too great? But I don’t know

If you're tempted to spend it, it's probably best to use it to pay off the card straight away. You might be motivated by seeing the balance falling.

Financially it's best to save it until the end of the interest free period and then pay the balance down as your savings will grow due to interest, but unless you have the discipline to move it to a savings account and not spend it, you'll not benefit.

Either way, you need to keep sending money to the account until the balance is paid off, as long as you make the minimum payment, either of the above ways are equally valid.

If it's all interest free you need to work out if/when interest becomes payable on each debt and allow for that too. How much debt are we talking?

No, I don’t need to do that - I’m not going to disclose it because Mumsnet is viscous and I don’t need to be hounded for it.

OP, if you can't pay by the end of the interest free period, chance are you can move it on anyway, so no need to worry about paying interest, just be mindful of when this kicks in, so you can apply for another offer before they start charging if needs be.

(Moneysaving Expert is loads better for debt advice because MN is weird about it in so many ways).

Yeah I know when the interest free period runs out, I just know that Mumsnet will be horrible about it and I don’t need it, I have a lot of regret and anxiety about it and I’m tackling it

Sorry you feel like people might attack you. I just thought it was worth mentioning that you need to be mindful of when interest becomes payable as that might affect which debts you need to prioritise. From someone who has been where you are and did many many hours research into it, I decided that for me making micro payments whilst being mindful of the overall deadlines for interest etc was worth it as I constantly had the feel good factor from tackling it regularly. Additionally, I liked knowing once the payment amount was gone it was gone and couldn't get swallowed up in something else. It's really great that you're tackling it and I hope the stress leaves you as you pay it down.

I think just having the means to do the overpayments now has taken a lot of the stress off me

I'd keep doing what you're doing, the important thing is you're chipping away at the debt. If paying over your excess daily rather than paying a bigger sum monthly works better for you then I'd stick with that.

Daily or weekly payments sound like a good idea for you. Well done for working at it!

Hey Op, for me finance and in particular debt is really personal and emotive and so even though it might make more maths sense to take the extra money to one side, earn interest on that to then paying off the debt in larger chunks, chipping away at it each time you get an extra payment in I think will really boost you (it certainly does me!). It also stops me finding a reason to spend it elsewhere and directly links what I am doing/ selling as extra to paying off the debt. Overall it's made me feel a lot more productive and in control about it. You've mentioned about your mental health too so I think emotionally you might feel better paying it off as the money comes in. Wishing you luck- it's a slog but so worth it. Have you looked at things like Dave Ramsey & similar. These have kept me motivated.

Smaller, regular payments are absolutely fine…target the one who’s interest free period ends first with minimum payments on everything else until first one is repaid in full. I’d cut all cards up too and remove them from any apps to stop you being tempted to use again. Good luck with your journey.