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Original poster

I'm almost ready to start clearing the debts - but I'm confused..........

53 replies

FAQinglovely · 19/02/2009 13:55

I know that you should pay off the ones with the highest interest rate first - yes?

Well I have 2 credit cards - both with similar amounts on them (almost identical actually) but totally different interest rates

One is 30.34% (I know I know I know......)

The other is purchases at 17.95% and cash withdrawals (of which some of it is) at 26.93%

Now I've been paying off the minimum payments on both of these account but now am nearly ready (just a few more other bills to clear) to start paying off bigger chunks to clear them. However the one with the highest interest rate the balance appears to be going down quicker than the one with the lower interest rates when using the minimum payments.

Should I stick with clearing the highest interest rates first or the one where the balance is going down the slowest with the minimum payments??

OP posts:
poopscoop · 19/02/2009 13:58

i think you need to continue clearing the higher interest rate one first, well that seems to be the advice from moneysaving expert. Have a look at his website, he is generally very good on this sort of thing. Also if you have a teensy bit more, shove just over the minumum on the 2nd card.

sagacious · 19/02/2009 13:58

I know this sounds bleeding obvious but can you not get a new credit card at a lower rate and transfer the those balances onto that ?

Original poster
FAQinglovely · 19/02/2009 13:59

oh should also add the minimum payment amount on the lower rate card is 1% of balance, and 5% on the higher rate one (which I guess is why it's going down quicker?)

OP posts:
muddleduck · 19/02/2009 14:02

poopscoop and sagacious are both right. Do what they say

Original poster
FAQinglovely · 19/02/2009 14:03

I'm wondering if I should pay extra on the lower interest rate one until the interest for the cash withdrawals has been reduced to virtually nothing (makes up the bulk of the interest at the moment) and then switch to concentrate on the higher rate one.

I think what's confusing me is the % for the minimum payment is so different on them that I'm actually clearing the higher rate one quicker on the minimum repayments than I am the lower rate one

OP posts:
poopscoop · 19/02/2009 14:03

oh dont liten to me, i am prob talking out of my arse , i am just going to direct faq to martin at moneysaving as i am on there so much myself seeking advice and ways to make my balances look a bit better!!!

Original poster
FAQinglovely · 19/02/2009 14:04

I can't get a new credit card - and definitely not at a lower rate I'm not working so no-one will touch me, and if they did it would be enough to transfer the balance of both accounts onto it.

OP posts:
poopscoop · 19/02/2009 14:06

have you any room on the lower interst rate one, to move a bit of the higher one over? Then still concentrate on getting shot of the higher one first.

sagacious · 19/02/2009 14:07

Fair do's FAQ
30.4 % a shocker

Personally I'm all about gratification, I'd choose the one which is going down quicker

(that sounds rude wasn't meant to !)

Original poster
FAQinglovely · 19/02/2009 14:12

have posted on MSE

I think it's the 4% difference in the minimum payment amounts that's throwing me out

OP posts:
muddleduck · 19/02/2009 14:17

Def do the higher interest one first.

The other one is only going down quicker as you are paying more into it. If you pay more into the higher one that will go down quicker (IYSWIM). Then you'll get the gratification of seeing them both going down!

mistlethrush · 19/02/2009 14:18

Yes, that's why the higher level one is going down quicker. Its still best to pay off the higher level one asap, then do the same on the other.

Original poster
FAQinglovely · 19/02/2009 14:18

no it's the higher interest rate one that is going down quickly, if I pay more into that then the lower rate one is gong to continue going down slowly

OP posts:
janinlondon · 19/02/2009 14:18

Cash withdrawals accumulate interest immediately - so as you are walking away from the machine, the interest is already adding up. That will be part of the reason why the lower interest rate card is taking longer to pay off. Unfortunately your payments against that card probably also have a specified order (it will be in the tiny print in t&c) and you will probably find that any payments go towards purchases before cash advances. Cash advances on a credit card are the work of the devil!!!

poopscoop · 19/02/2009 14:19

is that because you had taken 'cash' out of the lower one? they really sting you for doing that.

muddleduck · 19/02/2009 14:21

Sorry. got it all backwards .

do what everyone else says and ignore me.

AMumInScotland · 19/02/2009 14:21

Def keep paying more off the higher rate one - as much as you can afford to, as quickly as you can manage. Stick to the minimum payment on the lower interest card until the higher one is paid off (then cut up the higher one!)

The loweer one may be going down more slowly, but the interest that's building up on it is also building more slowly.

The minimum payment thing is a red herring because the amounts are different.

Original poster
FAQinglovely · 19/02/2009 14:22

yes I'd taken "cash" out - but the interest rate for cash withdrawals is still lower than the other credit card.

I think it's because I'm only paying 1% of the balance each month on the lower interest rate card, while I'm paying 5% on the higher one (if that makes sense?).

OP posts:
Original poster
FAQinglovely · 19/02/2009 14:30

that makes sense (no-one has replied to me over on MSE so I'm sticking here for now ).

It's just disheartening to see my balance being reduced by £25-30 a month (once interest has been added on) on the higher rate one and only about £10-15 on the lower rate one

OP posts:
AMumInScotland · 19/02/2009 15:28

It may not "feel" like you're achieving as much, but it really will get rid of both of them quicker. You just have to stick at it! Well done for sorting your finances out and getting on top of it by the way.

Original poster
FAQinglovely · 19/02/2009 15:39

yeah well I said that once I'd moved and my housing benefit was sorted I'd start making proper in roads into clearing the debt.

...........unfortunately I have just spent a couple of £100's buying a new under counter fridge and freezer - I needed them as there's not really space in my new kitchen for my (massive) upright fridge freezer and it's already doing my head in sat blocking off some of the cupboards and I've only been here 2 weeks! Plus I spent more than I needed to because I wanted graphite/silver ones

OP posts:
babypringle · 19/02/2009 15:46

try the snowball calculator www.whatsthecost.com/snowball.aspx - you can play around with the payments you make and it will show you how long it will take to repay and the difference focusing on the higher rate card will make. HTH

Original poster
FAQinglovely · 19/02/2009 15:46

however - just to regain a few credit points I also opened an online savings account last night, only got £10 in it so far, but will set up a regular (small for now) amount to go into it so that there's something there if I need it. Can make 1 withdrawal a year without losing any of the benefits and means if something breaks/suddenly need cahs for something unexpected I can take it out of there rather than using credit.

OP posts:
Original poster
FAQinglovely · 19/02/2009 15:50

ooo thanks for that link - really useful thanks

OP posts:
Original poster
FAQinglovely · 19/02/2009 16:59

damn you didn't warn me that they bite over there on MSE!!!!!

I have just been told (in not quite so many words) that I have a poor attitude to "risk" !

OP posts: