Who's good at Math? - credit card calculations.

[Homestar]

So, I've got a conundrum that I can't figure the answer to. I have 3 credit cards I'm paying off as fast as I can. All cards are cut up and not being used any more - win 1.

Now I just have to pay the bastards off as quick as I can. Do I hit one at a time and maintain minimum payments on the other 2 while I pay the first off, then pay the second off, etc, OR split the money equally between the 3? All of them are for similar amounts, and have similar amounts owing and similar interest rates. If I pay them all off together, I can put the equivalent of about 5 1/2 times the minimum payment on each per month. If I put a minimum payment on 2 of them, it would allow me to pay the equivalent of about 15 times the minimum payment on the other.

Which method will allow me to pay them off quicker and save the most money?

Cheers - Gav

[BMKal]

I had a similar dilemma a few years ago.

After getting financial advice from a friendly bank manager - it worked out far cheaper to take out a personal loan for the total value of the debt of all credit cards, used the loan to pay off the credit cards immediately and then just paid off the single personal loan.

Personal loan was at much lower interest rate than any of the credit cards. ;)

[Homestar]

I did think of that, but for all the faffing around and fees, where does that come into the calculation?:)

As it is, I can pay them all off by Feb, and I'm bloody sick of banks getting me to jump through hoops for everything.

After these buggers are gone, I've only got the Mortgages to worry about, which come in a distant second to these.

[87County]

I know it doesn't answer your question baci, but..

A bank other than the one/s the cards are with will often offer an interest-free period on balance transfers.

If you can arrange one of these you can effectively amalgamate the balances and then pay them off during the interest-free period and/or use Bmkal's method on the remaining balance at the end of the interest-free period.

[RHS58]

I had a similar dilemma a few years ago.

After getting financial advice from a friendly bank manager - it worked out far cheaper to take out a personal loan for the total value of the debt of all credit cards, used the loan to pay off the credit cards immediately and then just paid off the single personal loan.

Personal loan was at much lower interest rate than any of the credit cards. ;)

What he said.

That's good advice.

[Homestar]

Ok, looks like everyone is on the same page here apart from me. I might have to bite the bullet and go through all the crap they will want to get a loan.

Sooooo don't want to do that though, but you are all probably right...

[BMKal]

Another option might be to ask your bank if you have a line of credit available on your mortgage. We bought SWMBO's car this way. Virtually nothing in fees as the mortgage was already established - and the interest rate on the mortgage was way lower than hire purchase on a car.

Just a thought .........

I'm like you - I cut up all credit cards years ago. Wasn't me that had a problem with them, but SWMBO just couldn't help herself. :mad:

These days, if we want anything and haven't got the cash - we wait until the money is there. Haven't looked back since getting rid of the plastic - and have actually managed to save a bit. :D

[sheerluck]

I'd be tempted to consolidate onto an interest free card for now. Then when you get to the end of the interest free intro period then get the loan. Every cent helps!

[87County]

The short answer to your original question would be to pay as much above the minimum as possible on each card each month, so the better of your original options would be paying roughly equal amounts off each.

[Homestar]

Another option might be to ask your bank if you have a line of credit available on your mortgage. We bought SWMBO's car this way. Virtually nothing in fees as the mortgage was already established - and the interest rate on the mortgage was way lower than hire purchase on a car.

Just a thought .........

I'm like you - I cut up all credit cards years ago. Wasn't me that had a problem with them, but SWMBO just couldn't help herself. :mad:

These days, if we want anything and haven't got the cash - we wait until the money is there. Haven't looked back since getting rid of the plastic - and have actually managed to save a bit. :D

I will readily admit it is me that is at fault here...:(

"Hi, my name is Babs and I have an Ebay habit" :D

I've kicked it, but still paying for it...

[Bytemrk]

Like the others suggested - consolidate into one loan and go at it hard... a different card with an interest free or very low interest rate on balance transfers is a good option. (You can always apply and then cut the actual card up the day it arrives)

If you don't want to do that - I'd look at the current interest rate on each card before deciding which to pay first.

They often vary a lot and it's obvious you are better paying off the higher rate first...

Good luck with it mate.. they are mongel things if they get out of hand..:mad:

[999]

Just get a card with 0% balance transfer. anz have 16mths at the moment. Transfer all balances to that, make regular repayments for 16mths rinse and repeat if needed
I did this with a transfer from 1 card then back to original card 12 mths later:D. Log into your accounts and look for any offers. Its easy.

[3toes]

If you decide to stay with the cards and pay one off first and then the next until all are gone remember to pay more than the minimum payment on each of the other cards every 3 months or so. This will keep you in their better books. As you can find that if you just pay the minimum each month they put you in a higher risk category and jack up the rate figuring you cannot go anywhere else so they can charge you more. You are playing with a computer here so it does not need to be too much more just enough to register in the computer 'brain'.

[Mick_Marsh]

If the interest rates are the same, it doesn't matter whether you pay off one first or all at the same time. If they have annual fees, pay off one first, the one with the fee due first.

Psychologically, pay them off one at a time. It's encouraging to see them fall one after the other.

As others have said, investigate if you can roll them all into a zero interest account. You may have to combine them into one credit card before you do this but look at the fees first.

It's a good feeling when they're gone.

[jimr1]

I agree with the advice that has been said . If you can get one loan and pay off your cards , credit card interest is calculated on a daily basis , paying the minimum only prolongs your debt with credit cards . consolidate those debts and pay them off if you can , talk to your bank manager , most will give you good advice ,and try to help you , good luck Jim ..

[Homestar]

Thanks for all the advice. As per my original post, I'm paying the off evenly at the moment at 5 1/2 times the minimum payment, so no issues there.

I'll see if I can find someone who is decent to deal with and roll them into one loan. The thought of having to fill out all that paperwork and jump through all their hoops makes me want to puke though...

[bee utey]

If the credit accounts have an interest free period on purchases, the best way to keep interest charges down is to cycle as much money as you can through the accounts. Don't pay cash unless you absolutely can't avoid it. This goes for every bill that doesn't cost extra on credit, including car rego fees, insurance etc. When you have enough cash to purchase your goods, pay bills etc, put the cash straight into the lowest amount card account and use the card to pay the bill. Once you get a credit account to the point where you can pay it off every month it's essentially an interest free loan for the average balance. I haven't paid credit card interest in decades and my wife and I manage to control our spending accordingly.

[303gunner]

Ok, looks like everyone is on the same page here apart from me. I might have to bite the bullet and go through all the crap they will want to get a loan.

Sooooo don't want to do that though, but you are all probably right...
You may still be right.


Since the introduction of tighter credit reporting rules earlier this year, banks will hold more details about the types of credit you hold, credit you apply for, the rates you pay and the total amount of credit you owe. Credit Reports (https://www.moneysmart.gov.au/tools-and-resources/publications/factsheet-your-credit-report) are used for deciding wether to approve or decline your application, but also can be used to attract good borrowers by offering discounted interest rates. It is in your interest to keep your Credit Report as squeaky clean as possible, even if you are paying off debt and don't plan any more applications in the near future.


Applying for another loan while you still hold the credit cards, even though you can fully service the repayments and will sooner pay off the amount can be viewed as a red flag by future lenders. They may see the fact that you have (for example) one card with a $5000 limit, one with a $2000 limit, another with a $7500 limit and then applying for personal loan for $4000 as some kind of indicator of a borrower who is teetering on the verge of collapse (although you have met every repayment, pay above the minimum and only owe a total of eg $3500) with liabilities of $18,500.



Applying for a loan or a 0% honeymoon card could be attractive, but applications for finance can be time consuming and difficult particularly for self-employed or small business owners. You've got to weigh up wether the savings on interest would be outweighed by the costs of time and money in applying. Self-Employed or business owners might have to see their accountant to provide a statement of earnings to give the bank. If the total combined amounts you owe on the 3 cards are only a few thousand, the difference you would save by getting a lower interest Pers Loan would be outweighed by any application costs. Hook in and pay them off and close them as quick as you can.

[Homestar]

If the credit accounts have an interest free period on purchases, the best way to keep interest charges down is to cycle as much money as you can through the accounts. Don't pay cash unless you absolutely can't avoid it. This goes for every bill that doesn't cost extra on credit, including car rego fees, insurance etc. When you have enough cash to purchase your goods, pay bills etc, put the cash straight into the lowest amount card account and use the card to pay the bill. Once you get a credit account to the point where you can pay it off every month it's essentially an interest free loan for the average balance. I haven't paid credit card interest in decades and my wife and I manage to control our spending accordingly.

I've thought about doing this and have friends that do it, and think it's the way to go. Maybe one day I can try it, but my record with credit cards is bad...:(. Not sure if I trust myself at the moment with another one, even when I have the capacity to pay it off in full each month.

I have about 7 months to go and I'll have them payed off, I'll let sleeping dogs lie for a while before I think of trying this.

[Homestar]

You may still be right.


Since the introduction of tighter credit reporting rules earlier this year, banks will hold more details about the types of credit you hold, credit you apply for, the rates you pay and the total amount of credit you owe. Credit Reports (https://www.moneysmart.gov.au/tools-and-resources/publications/factsheet-your-credit-report) are used for deciding wether to approve or decline your application, but also can be used to attract good borrowers by offering discounted interest rates. It is in your interest to keep your Credit Report as squeaky clean as possible, even if you are paying off debt and don't plan any more applications in the near future.


Applying for another loan while you still hold the credit cards, even though you can fully service the repayments and will sooner pay off the amount can be viewed as a red flag by future lenders. They may see the fact that you have (for example) one card with a $5000 limit, one with a $2000 limit, another with a $7500 limit and then applying for personal loan for $4000 as some kind of indicator of a borrower who is teetering on the verge of collapse (although you have met every repayment, pay above the minimum and only owe a total of eg $3500) with liabilities of $18,500.



Applying for a loan or a 0% honeymoon card could be attractive, but applications for finance can be time consuming and difficult particularly for self-employed or small business owners. You've got to weigh up wether the savings on interest would be outweighed by the costs of time and money in applying. Self-Employed or business owners might have to see their accountant to provide a statement of earnings to give the bank. If the total combined amounts you owe on the 3 cards are only a few thousand, the difference you would save by getting a lower interest Pers Loan would be outweighed by any application costs. Hook in and pay them off and close them as quick as you can.

Yeah, interesting point. I monitor my credit report carefully and it is currently squeaky clean which is the way I want it as I want to get a second investment property in 12 or 18 months.

Hmmmm.....

[303gunner]

And if E-bay got you into this mess, use it to get out.


Sell any non-essential collectibles and treasures you have, and put the proceeds straight off your card balances. :wasntme:

[Homestar]

Have you been talking to my missus by any chance?:D. She says I have too much stuff, but most of it is Land Rover related, so I can't make things any smaller, my collection is still growing.:)

[Mick_Marsh]

Sell any non-essential collectibles and treasures you have
Wash your mouth out. All treasures are essential.

[Simon]

Order of repayment should be all about cost

So if the rate is the same on all 3 it makes no difference which is paid off faster unless there are annual fees are involved - in which case as an earlier poster has said try to pay down the card with the fee first if it means you can close it out before the next fee is payable

If you have a mixture it's a little more complicated. Basically you need to work out whether it is better to target fee but pay higher interest elsewhere or not

It's a similar calculation for whether to consolidate into a loan or move to a zero rate card - if arrangement fees are bigger than the interest you would expect to pay by not moving then better to stay put

If consolidating into the mortgage you need to make sure you can prepay otherwise there is the risk of being trapped over a longer term, which an be costly despite a lower rate

I probably have some simple excel sheets on the pc that will estimate interest over term give basic repayment assumptions - I used to be in financial modelling for a job