#FinanceQuestion #CreditCardDebt #MortgageIncrease
Hey everyone! 👋 I need some advice on my current financial situation. I have a credit card with a £1400 balance, 0% interest until the end of the year. My pay has increased recently, allowing me to build up my debit account balance. However, my mortgage is set to increase significantly next month with a new tracker deal. Here are my concerns:
– Should I pay off my credit card now or wait? 💳
– What if unexpected costs come up in the next few months? 🤔
– Will the mortgage increase impact my ability to cover expenses? 🏠
Possible solutions:
– Consider paying off the credit card to free up £200 a month for savings or mortgage payments. 💸
– Keep an eye on how the mortgage increase affects your finances before making a decision. 📈
What do you think? Any advice or suggestions would be greatly appreciated! Let’s help each other navigate these financial waters together. 💡💰
I’d suggest getting the card done. It’s money you owe and even if your mortgage goes up it’s not going anywhere (if anything if your mortgage really starts to bite you could be worse off once your 0% period ends) credit cards are cashflow drains. Cashflow is everything if you want to put some aside.
No need to pay off a 0% card. As long as you can lump sum it before the term expires.
There are a few scenarios where having cash is better than having access to credit, but having savings and 0% debt is more advantageous since you win on interest overall.
Pay off the minimum each month by direct debit, diarise the end of the 0% deal, ensure your savings match your balance at all times.
Focus on building an emergency fund and pay the minimum on the card for the next 5-6 months.
Make sure your emergency fund/savings are in a decent interest earning account.
When the time comes, clear the car and you’ve earned 4%+ on the saved money. Even at 4% for 6 months that’s £28.
If at anytime you think you might be tempted to use those savings for a luxury instead. Pay the card instead.
Do you have a detailed breakdown of your spending / budget?
You need to do projections of how you’ll cope with the mortgage increase – do a spreadsheet of your income and spending for the next few months.
There’s no point in paying off a credit card whilst it’s still 0%, but will you have enough money to pay it off when the 0% period ends?
If you have a 0% credit card, you should make the most of it while you can.
Look up ‘stoozing’: https://www.moneysavingexpert.com/credit-cards/stooze-cash-credit-cards/
Basically you should only pay off the minimums on the credit card during the 0% period. But (importantly) put the money aside in a high interest savings account. If you can find a fix with a good rate that expires just before the 0% period ends on your credit card then use that. Otherwise an easy-access savings account will do. Then when the 0% period is almost up, use the savings to pay the card off IN FULL. Make sure you make a note in your diary to do this! If you forget it could cost you because the credit card interest will skyrocket.
Then close the credit card, open a new 0% credit card and repeat!
I wouldn’t factor in your mortgage into this decision. It’s a separate thing. Paying off the credit card now won’t help with your mortgage (if anything it’ll stretch your cashflow)
You might as well earn interest while you can!