How to pay your credit card bill off and save money on interest.

[seylectric]

Having had a discussion with a group of friend in the local the other night I was amazed to find that a lot of people are simply paying the minimum payment on their credit card bills because after paying their monthly bills off they have little to pay off their credit card bill.

 

Does this sound like you? So what do you do to break the cycle? Well the good news is it's very easy and you DON'T need any more money to do it. Even if you don't have enough to pay off the whole credit card bill, use this plan and it will help to save you money and get your bills down.

 

How? It's simple. instead of paying your credit bill last with what's left, pay it FIRST! That way you save paying interest on a large credit card bill and depending on your balance you may be able to pay it off in full each month. Do this and after the first month you will not have any interest payments to make.

 

But what about the bills? Again it's dead easy. Once you have topped up your credit card you then use it to pay your bills. Most companies now accept credit card payments, even councils for council tax so you get to pay off your credit card bill AND use the balance to pay off your bills. As long as you don't owe zillions the 30-day or more interest free credit period means you don't pay any interest and you still get your bills paid.

 

Hope this makes sense, it works for me!

[covers22]

I've been doing just that for a few month's now and i'm not only saving the interest, the late payment penalties have stopped appearing on my statements also.

 

c22

[fivelaws]

What a great idea!

 

Nice work!

[Movingon]

OK... how does that work when you have a £7,300 balance against a £7,500 limit, the monthly payment required is £96.37, and the interest is £92.46?

 

How will paying the credit card first each month help? Sorry, but you have to make clear which kind of credit card user you're referring to, and what state their account's in when this plan can be used... it simply doesn't work for me.

[fivelaws]

it simply doesn't work for me.

It should; If your monthly bills (that you can pay be CC) amount to £500, you have to pay these anyway, so pay £596 off your balance, then use the "extra" £500 to pay your bills. For the x-days between paying the card and the bill transactions coming off, you will have paid less interest (maybe less than a tenner - but it's still money .

 

Only works though if you aren't bouncing off the upper-limit and your monthly bills are high enough to make it worth the hastle.

[seylectric]

Exactly. It DOES work, the point is that whatever your balance and credit limit is, by throwing in as much as you can you are reducing the interest payments and for those who have a low credit limit it won't take too long before you have paid off the balance.

 

For example - even if you are almost always on the edge of your credit limit - let's say you have a limit of £2000 and a monthly pay packet of £1500. You owe the credit card company £1800 and your minimum payment is say £100. So you pay your bills and you pay the c.c. company the £100 minimum payment.

 

The point is you are not significantly reducing the amount you owe and paying interest on that amount month-on-month. PAY the credit card company first then use the credit to pay your bills.

 

Pay them £1500 and you only owe interest on £300, not £1800. Yes, you're going to spend it all again before your next pay packet comes in but you will be paying less interest and it will not be too long before you can pay in your money, spend it all again and pay NO interest because of the interest-free period.

 

Trust me, this does work.

[Movingon]

Ah - there's the problem. My interest free period ran out months ago and I can't now get a credit card with that high a limit... so I'm stuck with them effectively.

[covers22]

ALL cards have an interest free period! from when you spend the money on it until the day they specify on your statement. most are about 52 days i beleive.

 

i even paid my mortgage this way for a couple of months. in the long term it didnt reduce my overall balance but i now pay significantly less interest than i used to, and no late payment or over limit fees!!

 

c22

[callumsgran]

when i got my cap one card i didnt get 52 days, i got 3 weeks!

[Stillborn Crisps]

Ah - there's the problem. My interest free period ran out months ago and I can't now get a credit card with that high a limit... so I'm stuck with them effectively.

 

Even so, if you can get a new 0% card that only covers half of your debt, it will allow you to have greater chance of reducing/eliminating the interest on the remaining amount it wont cover.

 

Just stick as much on the new 0% card as you can and leave it stagnant in the background till the interest free time is up (paying the minimum on it each month though, obviously).

 

Halifax were doing 0% for 1 year on their new cards - that's a really big chunk of time to try and make some juggling like this work.

 

Does anyone know of any other credit cards that do 0% for a year? Mine runs out soon so have got to swap!

[caro]

Take a look at http://www.moneysavingexpert.com It will open up a whole new world of stoozing, and they're always looking at credit card details.

[seylectric]

Haven't had the chance to get on the forum much lately, but worth bumping for anyone who hasn't seen it yet. Some good posts here.

 

Incidentally in the four months since I first posted this it's worth pointing out that by using this method I haven't paid a penny interest. OK I only have a small credit limit to play with but as originally stated remeber that whatever you owe on your credit card bill you WILL save money in interest this way, and eliminate late payment charges etc.

 

Now trying MAKING a bit of interest - even if you don't have a good credit limit and can only get a basic bank account. I do it using a basic Halifax Easycash bank account and a Halifax Web Saver account.

 

The Easycash account doesn't offer a debit card, cheque book or overdraft but does offer direct debits, standing orders, bank transfers etc. and can all be done via internet banking. The Web Saver account is exactly that, an internet-based savings account and pays over 4% interest (can't remember the exact rate at the moment but I think it's slightly above base rate).

 

The beauty is by using internet banking you can transfer all your money to and from the savings account instantly, so keep as much as possible in that and as little as possible in the Easycash account until a payment or direct debit is due, then simply transfer the funds you need back from the savings account - as I said the transfer is instant and the funds are available immediately.

 

Other banks will have similar options but check that any transfers between accounts are immediate.

[callumsgran]

Hiya, just to say i do this with my step account at NatWest, you're not supposed to be able to pay bills on the step a/c but if you open an e-savings account and have your salary paid into it you can do everything between the 2 accounts, its great!

And you get a solo card!!

[Bookworm]

Worth bumping indeed.

 

I have just reshuffled the 75% of my outgoings to do it this way, which should save us about £30 a month to start with, but as things gather momentum, will probably quite quickly save us nealry a massive £60 a month! Wow, and I mean that.

 

There is the added psychological bonus of clearing the card in full every month. Ok, I know that it just goes straight back on, but still... It feels like one is actually progressing towards a debt-free future..

 

I would add the warning, however, that this is not for the slightly disorganised, or people who don't have much time on their hands, as you would have to be very precise and on time for this to work. We all know those companies' charges thrive on people paying late, or going a bit over, etc...

 

I have created an alarmed note with all the companies, their reference numbers, and telephone numbers (or website addresses), and from which card the payment has to come from, allowing a £40/50 "gap" to allow for the interest still accruing on the card, etc...

 

The best part, for me, is that I am clearing one of the cards, on which I had, for the first ever, hgad a cash advance of about £70 in february. Because of the way the cards pay themselves, I have been paying £1.50 a month interest on it, which means that it would take me for ever to pay off that cash advance part. Now, I am paying it off, and that pleases me greatly

[ukaviator]

Hi..

 

I did that 3 years ago. Paid my wages in then paid all the bills.Works fine.

 

Uk. . .

[seylectric]

Great stuff Bookworm, the key is to always leave enough in for your next direct debit or whatever, or better still cancel them and pay them via bank transfer using internet banking.

 

I've had rows with the mortgage company over this who don't like the idea of me cancelling the direct debit and insist it's part of the agreement that a d/d is set up but I just keep paying by bank transfer anyway; I'm not in arrears so what are they going to do exactly? They can't take me to court for non-payment because I'm paying them!

 

For bills such as gas, electric etc. it also helps your cashflow because instead of them taking the payment on time you can leave it a week or two, take the extra interest and still pay your bills. That bit extra interest adds up over time.

 

Late payment charges? Just knock any added charges back off the bill and sent them a polite letter reminding them that such charges are illegal. Never fails!

 

PS good idea about the alarm reminder, I do this all the time. Just about everyone has a mobile phone and just about every mobile phone has a calendar in which you can easily set remiders with audible alarms. If not, most PC's have Microsoft Works pre-installed as standard, this also has a calendar in which you can set up audible and visual (pop-up) alarms. Use it!

[Bookworm]

PC's have Microsoft Works pre-installed as standard, this also has a calendar in which you can set up audible and visual (pop-up) alarms

 

Never knew that, I'm a Turbonote person myself, lol.

[callumsgran]

Wassa turbonote booky? I'm lost now?!!!

I dont pay anything by dd if its possible to pay by bank transfer, i managed to blag my letting agents to pay them this way also(they usually insist on standing order) so much more flexible

[seylectric]

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